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Who creates a QDRO for splitting retirement savings?

On Behalf of | Apr 2, 2023 | Property Division |

It is normal for couples contemplating divorce to worry about what the end of their marriage will mean for their future financial stability. It can be difficult to adjust one’s standard of living and to move forward with a choice that will drastically alter daily life when someone doesn’t know what to expect in the future.

All too often, people choose to avoid or delay divorce because they have unrealistic ideas about the consequence of dividing their property. Even those who understand the basic rules that apply to the process, like how New York property division laws aim to make the process fair for both spouses, may still worry about what will happen with certain resources, such as their retirement savings.

The savings people have set aside for retirement could be the only assets they have to rely on after they stop working, and often the division of the account is part of the settlement agreement or property division order. The actual division of the retirement savings will require a specialized document called a qualified domestic relations order (QDRO). Who puts this document together?

One of the lawyers will draft the QDRO

Although a family law judge may decide how couples split their retirement accounts or may approve a property division settlement that includes specific terms for the account, the courts don’t create the QDRO to divide the savings. That responsibility falls to the lawyers representing the spouses.

Either lawyer can put the document together and then present it to the courts for approval. The process helps ensure that neither party can manipulate or trick the other into submitting a document with terms that do not align with the court order. After receiving court approval, the process is not yet complete.

The spouses still need to submit the document to the business or professional managing the retirement account. A financial professional can then create a secondary account and divide the balance of the original account in accordance with the terms in the QDRO.

Although it can be frustrating to have to share retirement savings, at least those divorcing in New York don’t have to worry about losing even more of what they have put aside for their golden years to fees, penalties and taxes. Using the proper approach to divide valuable property can benefit those who are preparing for a New York divorce.