How Does a QDRO Affect Retirement Accounts in a Divorce?

Divorce is a difficult time for everyone involved. In a relatively short period of time, all couples must disentangle their relationship and all their financial assets and liabilities. During the course of most marriages, one or more of the partners will accrue retirement savings. These retirement accounts must be divided as well.

There are special rules and tools for dealing with retirement accounts. Most often, a QDRO or Qualified Domestic Relations Order is used in Okmulgee, Oklahoma.

The QDRO and How it is Used

A Qualified Domestic Relations Order is the tool most often used with the retirement accounts involved in an Okmulgee divorce. Often called a QDRO, it is an order of the court that can be used to allocate retirement benefits to a spouse. The QDRO is obtained through a motion and reflects the settlement agreement dividing property upon divorce.

In essence, your Okmulgee divorce attorney petitions the court for an order advising the retirement plan administrator of the property settlement involving the retirement account and directing that administrator to administer the plan according to the terms of the QDRO.

The order tells the plan administrator that a particular portion of retirement benefits will now belong to the other spouse as part of the divorce settlement. This is one way to ensure that a spouse can obtain retirement benefits upon divorce. This can be particularly important when one spouse works and the other stays home with the children.

How the Terms of the QDRO are Determined

Once your Okmulgee attorney drafts the motion, the court will hear evidence and make a ruling. Because Oklahoma is an equitable distribution state, rather than a state that splits assets in half, it important to understand that many factors will be considered by the judge in whether to divide retirement benefits and if so, in what proportions.

Like decisions about alimony, the court considers factors such as the length of the marriage, past contributions made to the community, future earning potential, and the like.

The court will issue a ruling that is an equitable, but not necessarily a 50/50 split.

A motion for a QDRO can also address child support obligations or alimony. It may also include portions of the retirement account earned prior to the marriage.

Normally, retirement benefits are not assignable to another person while the beneficiary is alive. A QDRO provides an exception to that rule.

Every Retirement Plan Has Varied Requirements

Retirement plans differ quite a bit, In order to best protect your interests, you need a QDRO that addresses your specific plan’s requirements as well as your divorce needs. Each retirement plan must comply with federal law. Also, each QDRO must comply with the requirements of that particular retirement plan.

If not drafted and executed correctly, the results could be financially disastrous for both parties. Because of that, it is unwise to use unfamiliar boilerplate language without the benefit of an attorney’s expertise.

Qualified Domestic Relations Order Ramifications

When handled correctly, spouses can benefit.

However, if the spouse takes the funds directly or has them deposited into a regular bank account, there can be huge tax costs for doing so. This acts as a withdrawal, triggering tax consequences. Thus, the funds must roll over into a qualified retirement plan in order to avoid penalties.

Overall, it is best to handle this complicated part of a divorce through an attorney. The decisions you make now will have consequences for years to come. You want to get it done correctly.