If you are getting a
divorce, you might be looking into the process, trying to get a better idea of
the steps involved. During your quest for answers, you likely came across
the term Qualified Domestic Relations Order (QDRO). A QDRO is essentially
a legal order that is used to divide certain retirement benefits, such
as 401(k) plans, IRAs, and private pension plans while protecting the
participating spouse from incurring an early withdrawal penalty. If you
wish to use a QDRO, however, your retirement plan must be covered by the
Employee Retirement Income Security Act (ERISA).
How a QDRO Can Help You
Only the marital portion of your retirement benefits are subject to division
in a divorce. Therefore, any of the contributions you made to your retirement
plans before your marriage will not end up on the chopping block. However,
this is not always straightforward, and pensions can be particularly challenging
to calculate, especially if the participating spouse did not retire yet.
If you and your spouse would rather forego this complex process, you should
consider trading an asset comparable in value during settlement negotiations.
Doing so will remove the need for a QDRO and keep your plan on track.
If you and your spouse have similar retirement assets and contributions,
a judge might even decide that you should both keep your respective plans
instead of going through the trouble of dividing them.
Ultimately, if you are determined to avoid using a QDRO, you have other
options available to you and, depending on your circumstances, they might
be better suited for your needs.
Managing Your QDRO Assets
If you do end up obtaining a QDRO to divide retirement assets during the
divorce process, you have a few different options available for managing
them. You can take the money as a lump sum, but you must be prepared to
pay taxes on it. For many, taking a lump sum and paying an exorbitant
amount of taxes on it is not an ideal option. If you wish to wait, you
can place the money in a qualified retirement plan where it will continue
to grow until you choose to retire. Another option that will allow you
defer taxes on these assets is to roll the money over into an IRA. Under
these circumstances, your QDRO assets will remain totally under your control.
Schedule a Consultation with One of Our Divorce Attorneys Today!
Getting a divorce is a complex process, especially when it comes to dividing
retirement assets. At the Law Office of Kathryn Marteeny, our knowledgeable
divorce attorneys will help guide you throughout this process, so your
interests remain protected. With over three decades of collective experience,
you can trust our ability to help you navigate your case, no matter how
complex it might be. Even if retirement is nowhere near your horizon,
it is never a good idea to gamble with your future.
Get started on your case today and
contact our legal team at (713) 936-2300 to schedule a consultation with one of
our divorce attorneys.