If you’re thinking about a divorce, holding on to the family home might not be the priority it once was. Many couples’ largest asset isn’t the home anymore. It’s their retirement plan balances. If your retirement is in your husband’s name, you’re usually entitled to some or all of it, and a QDRO, or qualified domestic relations order, protects your interest in it.
Retirement plans are usually locked down. They’re protected from taxes, creditors can’t touch them and even bankruptcy courts usually leave them alone. However, when a divorce happens, QDROs open them up so that you can get your share of the money that you helped to create during your marriage.
When a divorce proceeding starts, you or your attorney can contact your soon-to-be-ex-husband’s retirement plan administrator and let them know that a case is pending. The administrator may be able to lock down the plan to stop your husband from withdrawing the money and hiding it from the court and from you. Usually, you’ll have to make a written request, but a phone call can help you understand the retirement plan’s requirements. This is an important step to make sure that there’s money left for a qualified domestic relations order to distribute to you.
As you work through your divorce case or settlement, you’ll begin to see how the marital estate should be divided and how much of the retirement plan or its future benefits should be yours. When you have a divorce settlement agreement, you and your divorce attorney can draft the qualified domestic relations order. The QDRO gets signed by a court, which gives it legal power. While every state has different divorce laws, qualified domestic relations orders are covered by federal law, so they can be binding anywhere in the country. Once the plan administrator gets a certified copy of the QDRO, she will divide the retirement plan’s assets and benefits in accordance with it.
Here are some of the rules that apply to QDROs:
- You only need a qualified domestic relations order if you’re splitting a retirement plan. If you keep yours and your husband keeps his, no QDRO is needed.
- QDROs can cover both retirement benefits while your husband is alive and the survivor benefits that get paid after he dies.
- Your QDRO usually won’t give you rights to anything your ex-husband puts into his plan after the divorce.
- A QDRO should contain the name and mailing address of the plan participant and the payee, the name of the plan covered, and the way that the plan should be split up.
- QDROs can only assign payments to spouses, children or other dependents.
- You can’t get anything that your husband can’t get. If his plan only provides annual payments starting when he turns 62, for example, you likely won’t be able to get a lump sum today when he’s 45.
While I don’t give legal advice, I always remind my clients that it’s up to them and their attorney to write a qualified domestic relations order for the judge to sign. The judge will divide the assets, but it’s your responsibility to collect your share.
A QDRO is just a part of managing your post-divorce wealth. Since it only covers a portion of your husband’s plan, many of my clients still need a strategy to determine how to grow their investments above and beyond what comes from the qualified domestic relations order. When they combine what they get from it with what they do on their own, many of my clients can build portfolios that not only can take care of them but also of their children and grandchildren.
If you’d like to discuss your situation, please contact me and let me know.
Image: Crowe Legal