What is a QDRO?

The complexities of divorce can challenge Stamford residents who choose to end their marriages. While all aspects of divorce can present difficulties for individuals, one area of divorce and family law that can become problematic is property division. During a divorce, the parties to a marriage must decide how their shared real, personal, and intangible property should be divided up so that each emerges from the relationship with an equitable share.

Past posts on this blog have introduced the important topic of valuation; this post will address a sometimes convoluted process that involves the division of retirement assets. When an individual has a retirement account that is subject to division during a divorce, they may be required to enter into a qualified domestic relations order.

A qualified domestic relations order, known as a QDRO, is a legal document that instructs a retirement account to pay a named party proceeds of the account pursuant to a support or property division order. A QDRO must have certain information included in it in order to be valid, and an individual who receive funds from their ex-partner’s retirement account pursuant to a QDRO may take the proceeds in different payout formats.

Like other assets in a divorce-based property division, retirement proceeds distributed through QDROs have tax implications for both the recipient parties and the distributing parties. It is important that individuals who must divide retirement accounts and other high value assets during their legal proceedings work with legal representatives who handle high asset divorces.

This post offers no legal or financial advice or recommendations. Individuals should consult their high asset divorce attorneys to review the financial ramifications of their pending divorces and whether QDROs will be applicable.