Dividing assets during and after a divorce can be complex. IRA’s, 401K’s, pensions, and other retirement funds often need to be factored into the asset division plan. This is where a Qualified Domestic Relations Order, or QDRO, comes into play. However, you may be wondering who is responsible for filing a QDRO?
Who is Responsible for Filing a QDRO In a Divorce?
Simply put, the person that will be on the receiving end of the retirement assets is the person that should be filing the QDRO. In order to protect those assets from being directed someplace that they shouldn’t be, filing the QDRO should be done early as protection.
If both partners have retirements accounts, things can get more complicated. In this case, the best course is for both spouses to reach an agreement about who gets what and then file the QDRO jointly. If reaching an agreement is not possible, then the spouse with the least retirement funds should file the Qualified Domestic Relations Order.
When a QDRO is established, the administrator of the retirement will sign that order and process the disbursement of funds to the receiving partner. In the absence of a QDRO, the plan administrator is not required to do this.
Why You Should File A QDRO
Below we present a list of reasons why it is important that you file a QDRO:
- When you are married, any retirement money added to you or your partner’s accounts is viewed as marital property, which means that you are legally entitled to at least part of the money.
- A QDRO offers protection and a guarantee that you will receive what you are entitled to even if your ex quits their job, cashes in early, or passes away.
- A QDRO may even be utilized to ensure that spouse support and/or maintenance payments are made. The court could order that those payments may be made from the retirement funds, and this enables the paying partner access to their retirement money without tax penalty.
- Finally, if there is no QDRO in place, nearly all financial institutions won’t release the assets to the entitled person.
At the beginning of divorce proceedings, the spouses may think that they are in agreement about asset division. However, if the asset division isn’t included in the divorce decree, then either partner can withdraw from any verbal agreements. Lacking a QDRO makes it possible for your ex’s retirement funds to be excluded in the divorce settlement, even though you had a legal right to some of the funds.
Typically, the QDRO form should be completed and presented to the divorce court well in advance of the final stages of your divorce.
Avoid QDRO Complications
Since there are tax and legal implications when it comes to dividing retirement assets, things can sometimes become complicated. If you don’t feel comfortable with the process, you should seek the advice of a family or divorce lawyer. However, if your situation is more simple and you feel confident that you understand what you are doing, then you can draft your paperwork with a reputable online QDRO service. This will save you considerable money versus hiring an attorney.