If your divorce involves retirement accounts such as a 401(k), 403(b) or pension plan, you may need a document called a qualified domestic relations order (QDRO) to divide those accounts. Retirement accounts often represent a significant part of a divorcing couple’s assets, so it’s important to understand what is involved in order to receive your share of those accounts after they have been divided by agreement or by the court.
What Does a QDRO Do?
Retirement plan providers are contractually bound to pay benefits to, or hold account assets for the benefit of, the account holder or plan participant. A QDRO is a legal directive requiring the plan provider to instead distribute a portion (or all) of the account holder’s benefits or account assets to his or her former spouse as part of the division of the marital estate in a divorce.
QDROs should be tailored to the specific types of account(s) involved. Public employee benefit accounts may require different provisions than private employer 401(k) plans, and there are often additional considerations for government or military retirement accounts.
When QDROs are well-drafted, they include protections for the recipient spouse to ensure he or she receives the amount that the parties agreed upon (or the amount that the court ordered he or she receive) from the other spouse’s retirement account. When finalized, the QDRO will have to be signed by the judge presiding over your divorce case.
When Should QDROs be Drafted?
Although your divorce order may have awarded you a share of your former spouse’s retirement accounts, you will need a Wisconsin QDRO in order to receive those assets.
QDROs can be drafted as soon as the divorce has been finalized. While you may assume there is no rush to get a QDRO in place if your ex-spouse isn’t actually eligible for benefits yet, it makes sense to begin the process immediately.
Waiting too long to begin the QDRO process could have adverse consequences. Under Wisconsin law, when the parties fail to take action on a judgement in a divorce and more than 20 years have passed, that judgment may no longer be enforceable. For an individual who thought it was best to wait to get a QDRO until his or her ex-spouse became eligible for benefits, this could be an unpleasant surprise. Properly preparing and filing a QDRO can also ensure you will actually collect under your spouse’s retirement plan.
Are There Situations When a QDRO Isn’t Necessary?
Yes! You will normally need a QDRO if the divorce awards each of you a portion of one or more defined benefit or defined contribution retirement accounts. There are even special circumstances where a QDRO may be necessary to disclaim your spouse’s survivorship interest in your retirement account. However, in general, if your marital settlement agreement awards your entire retirement account to you and your former spouse’s retirement account entirely to him or her, then a QDRO may not be necessary.
A Skilled Divorce Attorney Can Help Protect Your Rights When QDROs are Involved
As with any asset you receive in a divorce, it’s important to ensure the transfer of qualified retirement plan assets happens according to the terms of your divorce judgment.
Your divorce attorney will play an important role in making sure your marital settlement agreement and/or divorce judgment includes language to require a QDRO, when necessary, to facilitate this transfer. Your attorney will also help ensure the QDRO protects your interests, both now and in the future.
To learn more, contact an experienced, knowledgeable family law attorney at Schott, Bublitz & Engel, S.C. in Waukesha today.
By AnnMarie Sylla
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