Texas is a community property state, which means all assets acquired by a couple during a marriage are subject to fair and equitable division upon divorce. In order to divide retirement accounts (IRAs, 401ks, 403bs, etc.), you need a properly executed qualified domestic relations order (QDRO). The trouble is that’s it’s pretty easy to screw up a QDRO if you don’t know what you’re doing.
What is a qualified domestic relations order (QDRO)?
The Internal Revenue Service describes a QDRO as “a judgment, decree or order for a retirement plan to pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependents of a participant.”
Sounds pretty simple, right? Not so fast. We regularly meet with clients who tried to handle the QDRO process themselves or used an attorney who didn’t understand the intricacies of QDROs. While we’re able to help many of these clients sort things out, others end up kissing their share of marital retirement funds goodbye due to bad (or no) legal advice.
Three reasons QDROs go wrong and how to avoid them
To make sure you get your fair share of your spouse’s retirement assets, it’s important to act NOW. The following are the common reasons QDROs go wrong and how you can avoid them.
Reason No. 1: Financial ignorance. In many marriages, it’s very common that one spouse handles most if not all of the family’s finances. This can be dangerous even if your marriage doesn’t end in divorce. What happens if your spouse becomes incapacitated, or worse, passes away?
If your grasp on the family finances is lacking, take time to learn everything you can about your financial accounts pronto. This includes financial institution names, types of accounts (checking, savings, credit cards, insurance, and of course, retirement accounts), account numbers, balances, whose names are on those accounts, beneficiaries, login/password info, etc.
It’s also essential to make copies of financial statements during this process and save them in a secure location. This is especially important if a divorce is looming. Financial documents have a way of disappearing during a divorce, especially retirement account paperwork. If you want to secure a QDRO, you’ll need detailed information about those accounts.
Reason No. 2: QDRO paperwork not filled out properly. In order for you to receive a portion of your spouse’s retirement funds, the plan administrator of the retirement plan must QUALIFY the request as being in compliance with the Employment Retirement Income Security Act (ERISA). The purpose of ERISA is to prevent employees from transferring funds or benefits to someone else or wasting retirement money, as well as protect the funds from being seized by creditors.
The information plan administrators require for a QDRO varies from plan to plan. If you don’t provide accurate information or omit certain details, the administrator can reject your domestic relations order request. That means it’s not “qualified,” and you won’t be able to get a court order to receive a portion of your spouse’s retirement assets.
To ensure QDRO paperwork is filled out correctly, hire a law firm with QDRO expertise. Sure, it’s going to cost you more money to hire someone to handle the paperwork but it’s worth it when sizeable retirement assets are at risk.
Reason No. 3: Bad legal advice. Not only do you need to provide accurate information to the plan administrator, you need a divorce attorney who knows how to navigate the QDRO process.
We’ve had clients come to us who hired attorneys who drafted the language in the decree improperly and didn’t even initiate a QDRO. OR the attorney didn’t understand the QDRO process so they told the client they should wait and go through the QDRO process later. OR the attorney outsourced the QDRO to someone who didn’t handle it properly.
Experienced divorce attorneys know they need to work closely with the plan administrator to get the language right in the decree and the QDRO. They also know that it’s typically most beneficial to deal with QDROs and other issues related to property division DURING the divorce, not later. That way you still have some degree of control over the property and the other party.
Need a QDRO in Tarrant County? Hire an experienced divorce attorney
There’s more to a QDRO than filling out a simple form. At the Sisemore Law Firm in Fort Worth, our team understands the many intricacies involved with QDROs and how to execute them properly.
If you live in Tarrant County and want to learn more about QDROs during divorce, contact us to schedule a confidential case review with our founder Justin Sisemore. You can reach our office by telephone at (817) 336-4444 or connect with us online.
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