What is a QDRO?

The decision to divorce is only the first step in the process. There are still several issues that you must negotiate with your spouse, with property division being one of the most complex – and contentious.

You must decide how to divide your marital assets, including everything from the dining room table to your bank accounts. This also often includes the retirement benefits you earned during your marriage.

Retirement assets often considered marital property

As we have discussed in past blog posts, your retirement assets – as well as your spouse’s retirement assets – earned during the marriage are marital property. Under Arizona law, this requires you to divide this portion of retirement assets equitably between you and your ex-spouse.

Many people know this, but the process of dividing these assets can be stressful and confusing.

How do you divide retirement assets?

To divide employment-based retirement assets, you will need a qualified domestic relations order (QDRO). This order has several purposes, including:

  • It legally entitles you to receive benefits from your ex-spouse’s retirement;
  • It prevents early-withdrawal penalties and fees; and
  • It can arrange how you will obtain assets from your ex-spouse’s retirement.

However, these documents are not as simple as they might seem. These orders require precision and understanding to ensure your rights are protected and you are assigned correctly as an alternate payee on the retirement plan.

It is also important to note that no order will be the same. The details in your QDRO will depend on the kind of retirement plan your ex-spouse has – such as a 401(k) or a 403(b) – as well as the benefits they receive under this plan.

What makes a QDRO?

A proper QDRO must meet certain conditions to be effective. For example, it must:

  1. Be a legal order or part of a merged property settlement agreement or a decree of dissolution or a court order
  2. Comply with the federal Employee Retirement Income Security Act (ERISA) or State Law or U.S. Code;
  3. Comply with Arizona’s domestic relations laws; and
  4. Relate to your marital property rights.

While navigating a divorce, you want to ensure you protect your rights now and for the future. And understanding all of the details of a QDRO can be complex. That is why it is often helpful to consult an experienced divorce attorney when establishing a QDRO.