QDRO: I need a what??

If part of your divorce settlement includes a division of retirement assets held with a current or former employer, you may need a QDRO (Qualified Domestic Relations Order) or similar document, depending on the retirement plan. One of the mistakes that I see people make when dividing assets, is simply dividing each account down the middle. Seems like it would be fair, right? While it might be fair, it may also cause you to incur more costs than you would, if you were a little more creative about your settlement.


There are a couple of costs to consider. There is a cost to have someone facilitate drafting the QDRO, which we offer at a flat fee of $350, a very reasonable fee compared to others. I’ve seen some charge as much as $2500 to prepare a QDRO. Yikes! Additionally, each plan charges an administrative fee on their side as well. Thus, if you are dividing up several plans, the administrative process may become costly.


Important things to know about QDRO’s:


1.       The QDRO (or similar order) does not get prepared until after the divorce has been finalized as the settlement is necessary to make the request.


2.       When receiving retirement funds as part of your divorce settlement via a QDRO, it is the only opportunity to take cash out of a retirement account before age 59.5 without having to pay an IRS 10% penalty.  (Taxes will still need to be paid on the amount withdrawn from a pre-tax account.) Talk to your financial planner about the best way to handle retirement funds you are receiving as part of a divorce settlement.


3.       Complete the division of assets as soon as possible once you have the decree. There are several circumstances that can occur in the meantime if you wait (e.g., the market drops substantially). This can make it particularly difficult if you need cash from the account.


Contact me with questions or to request your QDRO facilitation. Click here to access the form to request a QDRO.

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