Gaps between federal pension laws and state divorce laws often leave divorcing couples unsure of how to divide their individual retirement accounts. Learn why you may need a QDRO below for thorough asset distribution.
What Is a QDRO?
A Qualified Domestic Relations Order, or QDRO (pronounced “quadro”), is a legal court order that tells a retirement account administrator when and how to distribute retirement assets between spouses after a divorce. Legal divorce agreements alone do not give account administrators the power to divide retirement assets because divorce laws are state specific while retirement pension laws are on a federal level. Because of this gap, you must file a QDRO during the divorce process to bridge federal and state laws, assuming you wish to divide your retirement accounts.
Why You May Want a QDRO in Massachusetts
QDROs aren’t just for account division upon maturity, but they can also satisfy fund distribution requirements in the present. For example, you can use a QDRO to distribute retirement funds to fulfill alimony or child support payments without early withdrawal penalties. The legal court order can work for nearly any type of retirement plan, including private pensions, 401(k)s, 403(b)s, 457 plans, ESOPs, and defined benefit plans.
Here are a few reasons why you need a QDRO:
- Peace of mind for asset distribution upon retirement account maturity
- Reduced tax issues with early withdrawals
- Easier alimony or child support fulfillment
- Improved financial security
How To Divide Assets With a QDRO
Your family law attorney can advise you through each step of the QDRO process to ensure that you complete all necessary paperwork. The basic steps are as follows:
- A qualified attorney or company drafts the QDRO based on your retirement plan requirements and assets.
- You submit a QDRO pre-approval draft to your plan administrator to ensure that it meets the requirements.
- You submit the pre-approved QDRO draft to your divorce court with the Jointly Assented to Motion.
- The court signs and approves the QDRO draft and sends it back to you.
- You send the signed and certified draft to your plan administrator.
- After confirmation, you send the administrator further information to complete the fund transfer and deposit.
How Much Does a QDRO Cost?
A QDRO can cost anywhere from $300 to $1,000, excluding legal fees, depending on the service you choose to produce the document.
How Long Does the QDRO Process Take?
The QDRO process can take around two to six months at a minimum, depending on how quickly each party completes their end of the process.
When Should I Prepare My QDRO?
You should prepare your QDRO as soon as a legal divorce agreement is reached.
Contact an Experienced Divorce Attorney in Massachusetts Today
Now that you know why you need a QDRO, call Koiles Pratt Family Law Group in Salem, MA, at (978) 744-7774 for a confidential consultation with our experienced divorce attorney team.