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The importance of having a properly drafted QDRO

Retirement plans are often significant assets in households. When a marriage comes to an end, some people may overlook these assets. In other situations, divorcing couples may agree to divide a retirement account in their property settlements. It is vital for people who are facing divorce to understand that the divorce decree, standing alone, may not be sufficient to properly transfer the right to receive retirement account benefits.

Employer sponsored retirement plans generally are not bound by the terms of a divorce decree. If you and your spouse agree to apportion retirement assets while dividing marital property, you will likely need to have a separate court order that addresses the issue directly. These documents are known as qualified domestic relations orders (QDRO). The order must be accepted by the retirement plan administrator to become a fully qualified order.

Even those who express interest in retirement plan during divorce find QDROs utterly confusing. But if not appropriately drafted, you may lose the benefits of your ex-spouse’s retirement plan assets.

What Is a QDRO?

A QDRO is a unique court order to pay a portion of a qualified retirement plan to cater for child support, alimony or mutual property rights to a spouse, former spouse, a child or other dependents of the participant. QDROs must contain certain specific information.

Why Does It Matter to Have a Properly Drafted QDRO?

These documents are fairly complex and require a range of necessary elements. You will need to apply the federal legal terms, review, and figure how the provisions of the plan can apply to your unique situation. As such, it requires a proper understanding of the law.

QDROs must be properly drafted to protect the rights of the parties involved. Any slight mistake made in the preparation may cost you your spouse’s retirement plan participation benefits in the thousands of dollars.