How does a qualified domestic relations order work?

A qualified domestic relations order, commonly known as a QDRO, is a court order allowing someone other than the original plan participant to receive money from a retirement account. For many individuals, especially those divorcing later in life, retirement accounts represent a significant investment and, therefore, are often subject to property division.

Although many retirement plan administrators offer the paperwork to draft a qualified domestic relations order, doing so can be extremely complicated. Divorcing couples may wish to seek the help of an attorney when planning these orders. A well-drafted qualified domestic relations order will contain the specific information necessary to make it legal and enforceable. It will describe how assets are to be divided between alternate payees and the plan participant.

In order for a qualified domestic relations order to be enforceable, the plans administrator must approve it. Although a plan administrator may provide a participant with the forms necessary to draft a qualified domestic relations order, there are specific legal elements that are necessary for it to be enforceable, and therefore, may be best drafted with the help of a legal professional.

Although the plan participant may not agree with dividing their retirement assets, a transfer of assets through a qualified domestic relations order is not subject to early withdrawal penalties. While not all retirement accounts qualify for this type of property division, speaking to an attorney can help identify plans that do.

There are a number of factors that should be considered when determining if a qualified domestic relations order is appropriate for your situation. Speaking to an experienced divorce attorney may help you draft an effective QDRO that is in the best interest of both spouses.