What is a QDRO?
If you are going through a divorce in Salt Lake City, chances are that you and your spouse will be dividing your retirement plans. To make sure that your property division is done correctly, you will need what is called a qualified domestic relations order. According to Fox Business, a QDRO is a court order which specifies that the retirement account is to be divided and how the division is to be conducted.
For example, if you and your spouse have a couple of 401(k)s, and you agree that you will split them evenly, the QDRO will state that each of you will receive 50 percent of the account. It is important that the QDRO specify the amount in percentage rather than dollars. This protects you if you are the original account holder in the event that the account loses money due to a problem with the market. If the order says that your spouse will receive $200,000 and the account value is only $300,000, the ex-spouse will still receive that amount. However, if the order says the spouse will receive 40 percent, then the spouse only receives that percentage of the account’s value.
Many retirement accounts are subject to taxes and fees if money is drawn out prematurely. However, the QDRO is your documentation that proves the money has been taken out due to a divorce. Therefore, even if you are dealing with accounts that don’t require a QDRO, it is still a good idea to get one and to keep it on file. While this information may be useful, it should not be viewed as legal counsel or advice.