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Dividing retirement funds in divorce: looking at QDROs, P.1

In our last post, we began looking at the issue of dividing retirement assets in divorce. As we noted, unless a spouse is named as a beneficiary or the state of divorce considers funds contributed to the account during the marriage to be marital property, the non-holding spouse’s only option is to negotiate for a share of the funds.

Negotiation is certainly important in property division, as it can allow spouses to secure an agreement which gives them the right to assets important to them. Some assets may have sentimental value, while others—like retirement assets—may simply have financial value. Negotiation of funds held in 401(k)s and IRAs is particularly important for older couples who are nearing retirement. This is especially important for spouses who, because of their contributions to the marriage, are at greater financial risk upon retirement. 

In any divorce case, an experienced attorney will have the goal of ensuring that his or her client’s financial interests are zealously represented so that party has the best shot at a fair division of assets and financial success after the marriage ends. One tool that can help with this is a qualified domestic relations order (QDRO).

A QDRO is an order creating or recognizing or establishing a spouse’s right to receive all or part of retirement plan benefits. To be qualified, the order must include specific information, including: the name of each plan to which the order applies; the dollar amount or percentage—or the means of determining the amount or percentage—of the benefit that should be paid to the spouse; and the number of payments to which the order applies.

We’ll continue looking at the requirements for QDROs, and how an experienced attorney can help ensure everything is done properly in this area.

Source: U.S. Department of Labor, “QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders,” 2014. 

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