When dividing a retirement account by a Qualified Domestic Relations Order (QDRO) during or after a divorce, there can be hidden costs that your attorney may not know.
One of the biggest is fees; the company that manages the retirement account will charge $200.00 to $3,000.00 to review and process a QDRO.
People will tell you that you don’t have to pay taxes when you receive your portion of the retirement account by QDRO. This is partially true. If you take your part in a lump sum and don’t put the funds into a tax-deferred account, you will have to pay taxes because they were not taxed when the funds were put into the retirement account.
Let’s not forget that you have to pay for the division of the order. The cost depends on what is needed. For example, the attorney must bring the court into the situation because one party is not cooperating or a calculation needs to be done.
This list is not conclusive. Please consult an attorney that focuses on dividing retirement accounts in your state to seek legal advice about QDROs.