When going through your divorce, you will often hear legal terms that are foreign to you, but are quite common in the family law world. One term used quite often is QDRO. A QDRO simply stands for qualified domestic relations order. It is a legal document, separate from your final judgment of dissolution of marriage, that details how a retirement account or pension plan will be divided after the divorce. In general, if you were to transfer to your spouse a portion of your retirement account, you would be responsible for paying the penalties and taxes associated with the transfer. But, if a QDRO is entered by a judge, then you will not have to pay the penalties and taxes. If the retirement account is a 401(k), IRA or other retirement account, the transfer of funds would simply create another retirement for your spouse. The account is in your spouse’s name only and you have no control over the new account, but you obviously will continue to maintain control over the remaining funds in your own retirement account.
If your spouse wishes to withdraw funds after they are transferred by a QDRO, then your spouse alone will incur the typical penalties and taxes associated with the withdraw. You will be shielded from those penalties. A QDRO can be a complex document. Here at Robert Sparks Attorneys we contract out to attorneys who specialize in drafting QDRO’s when one is required. If you or your spouse has a retirement account that is considered marital property, then more than likely you will require a QDRO to divide the asset. Contact your expert family law attorney to discuss this matter further. If the retirement account is a substantial asset, the penalties to transfer the funds could also be substantial. It’s important that the QDRO is drafted properly in order for you to avoid being charged with the penalties and taxes associated with a transfer.