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Understanding the role of a QDRO

On Behalf of | Jan 26, 2021 | Divorce

The fate of retirement benefits is at the top of the list of concerns for many couples facing divorce. In many instances, courts order couples to split retirement benefits which could drastically alter a person’s retirement plans. 

The method of separating retirement accounts varies depending on the length of the marriage, the type of benefits and a couple’s input. A Qualified Domestic Relations Order or QDRO is one helpful resource they could use. 

Regulation of payments

A major concern of individuals awaiting payment from their ex is whether or not they will receive payments at all. A QDRO helps alleviate some of this concern through the regulation of court-ordered payments. According to the Internal Revenue Service, a QDRO contains specific details regarding payment frequency and amount. 

Under the regulation of a QDRO, participants can continue to receive a share of retirement benefits despite the change in their marital status. Depending on the type of retirement account, people receiving retirement benefits under a QDRO may have the option of rolling their payment over into a personal retirement account. 

Establishing a new plan

Creating a QDRO takes time and cooperation from both parties. If carefully coordinated, however, it can add value and fairness to divorce settlements in regards to retirement. U.S. News also suggests that a QDRO could save people from incurring tax penalties. 

A few drafts will precede a finalized version of a couple’s QDRO. Once court-approved, it will regulate payments and serve as an ongoing contractual agreement. Signatures of all participants must appear on the document. People may consider sharing a copy of their QDRO with their plan provider for reference.