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Do you need a Qualified Domestic Relations Order?

Those who may be contemplating divorce should be aware of the different ways that a split can affect retirement benefits. An ex-spouse may be entitled to some benefits from the retirement plans of a former wife or husband. There are also additional factors at play, such as whether an ex can immediately access part of the assets or whether he or she must wait until the plan participant retires or dies.

In order for former spouses to receive present or future retirement benefits from their exes, it is usually necessary for their attorneys to file a Qualified Domestic Relations Order with the court. Known as a QDRO, this allows plan administrators to distribute an ex-spouse's share of the employee's retirement benefits to his or her former wife or husband.

Courts have discretion over the portion of pension benefits to award to a former spouse, minor child or other dependent. These allotments are detailed in the QDRO, and plan administrators must honor the terms. Sometimes a QDRO orders the retirement benefits to be paid out to an alternate payee. Orders can be part of court decrees or judgments and are frequently attached to the final judgment in a couple's property settlement after a divorce.

Your family law attorney might want to arrange a consultation with an estate planning lawyer at some point during negotiations for the property settlement portion of your divorce. Depending upon your particular financial circumstances, you can discover the best strategy to pursue when dividing up financial assets like retirement accounts and pension plans. This will allow you to maximize the value of any investments you make with a lump sum payment from your property settlement.

Source: Internal Revenue Service, "Retirement Topics - Divorce," accessed Feb. 03, 2016

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