Understanding QDROs

Retirement accounts and pension plans are an important part of the community property division in a divorce.  If either you or your spouse have an employer pension plan that was added to during your marriage, it is a marital asset and community property, even if only one spouse’s name is actually on the account. This asset is divided in the divorce, but divvying it up is much more complex than simply splitting up a bank account or changing the title on a car. Because the money in these accounts generally cannot be transferred by the owner’s request, there is a complex process that must take place to be able to move the funds out and give them to the other spouse as part of the divorce settlement or order.

To access the funds in the account that you and your spouse or a judge has decided should be transferred, your attorney must prepare a Qualified Domestic Relations Order, called a QDRO (pronounced “quadro”). This document must be prepared to meet the specifications of the individual pension plan or account. The court signs the order and it is sent to the company that manages and administers the account. If the document meets the requirements set up by the Administrator of the Plan being divided, the funds can be transferred to an account for the receiving spouse. In other words the receiving spouse now has a “sub-account” in the ex-spouse’s Plan, in her name. She is restricted by the same rules as the Plan Participant when it comes to withdrawing the money. Occasionally the Plan will allow the receiving spouse to roll her share of the Plan into a Rollover IRA account. Talk to your attorney to get details about QDROs and whether one is needed in your case.  Your attorney can also advise you as to the actions you need to take if you receive QDRO funds to avoid tax issues.

The Sampair Group handles complex financial divorces in Maricopa County, Arizona. Our office is conveniently located to serve you and is ready to take your call. Make an appointment now.