With the exception of your family home at any businesses you may own, your retirement account will probably be the most hotly contested asset in your divorce proceedings. You may have accumulated tens or even hundreds of thousands of dollars worth of savings and investments with the goal of a stable and comfortable retirement.
Divorce often necessitates dividing those assets. The courts will typically do so through a Qualified Domestic Relations Order (QDRO). There is a lot of confusion about QDROs, including who creates them and who files them. Who will handle the QDRO for your divorce?
The person who doesn’t currently hold the account usually files the QDRO
Typically, a QDRO serves as court-ordered instructions to the plan administrator who manages one spouse’s retirement benefits or pension. It is typical for the spouse whose name is not on the account to be the one who has their attorney draft a QDRO in compliance with how the courts ordered the division of their assets or any agreement the couple reached in a prenuptial or postnuptial agreement.
Once the attorney creates the QDRO, they then submit it to the court for approval. It must get filed with the plan administrator who manages the benefits. Simply receiving court approval will not enact a QDRO.
The person who manages or administers the retirement account or pension must create a second account after receiving the QDRO and divide a portion of the balance from the original account into the new one.
Mistakes with your QDRO will directly impact your retirement
There are all kinds of mistakes that people make when it comes to creating and filing a QDRO. Not taking timely action after a divorce, for example, can be a big mistake.
While you can always file a QDRO well after divorce proceedings, the potential exists for either market downturns or unscrupulous withdrawals by a former spouse to drastically diminish what assets are available to the spouse receiving a portion of the account through a QDRO.
Talking about your retirement account and hopes for the divorce with an attorney who understands QDROs will improve your chances of avoiding mistakes that diminish what benefits you received from a QDRO.