What is a Qualified Domestic Relations Order or QDRO?
- A qdro or qualified Domestic Relations order is a way to split up retirement accounts and pensions in a divorce. Qdros help one spouse obtain their share of another spouse's retirement account without having to go through the process of just withdrawing monies from retirement accounts and paying IRS tax penalties.
- Lets suppose to husband has $100,000 in a 401k and at the end of the divorce the wife is awarded $50,000 as part of the division of the community estate, then spouse receiving the money (or either spouse, it really doesn't matter) would have her attorney fill out the qualified Domestic Relations order and submit it to the court after the judge has signed the final decree of divorce.
- In our scenario, when monies are split up through a qdro the plan administrator will allocate the wife's portion under her name so then the wife can either leave the money there, withdraw it immediately, or roll it over into her own separate qualified retirement account. It's probably not smart to take out such monies too early and pay the tax man, but to each their own. Some issues that come up with qdros are, who's going to pay to get it drafted, or what happens when one-party reneges on an agreed division and tries to prevent the other party from getting her money.
- Probably the biggest issue is the personal tax implications connected with moving retirement monies around. Another issue that might sometimes not seem obvious is actually knowing what Retirement accounts exist to be possibly divided. The proper use of discovery should ensure all retirement accounts are disclosed to either party in the divorce process. In Harris County, all the judges are used to signing off on post-divorce qualified Domestic Relations orders.
- A lot of people Outsource the job of drafting qdros. Some law firms even make it their specialty to only draft qdros for other lawyers. In Texas one of the Qdro specialists I sometimes use is qdro services located in the woodlands. Another is philipphillips in Fort worth. Links are pasted below.