QDRO’s (Qualified Domestic Relations Order) are a common way of dividing retirement plans in the divorce process. QDROs are also renowned for going wrong. Here are few items your attorneys need to be addressing:
- Confirm with the Plan Sponsor – Not all retirement plans are created equal. 401(k)s, 403(b)s, 457s, etc. are governed by a “plan document” that establishes what can and cannot be done. Just because an equitable agreement has been reached between parties does not mean this plan will be accepted by the plan sponsor.
- Forgetting to Address Loans – Loans taken from employer-sponsored retirement plans can throw kinks in a distribution plan. Loans need to be addressed and discussed as to whether they were for martial use or considered non-marital (or partial). How to handle loans needs to be
- Establish a valuation date – Many retirement plans are volatile as they are invested in the market. Amounts can change quickly. Setting a date of valuation will help in making an equitable decision between parties on the retirement plan as well as other assets.
- Forgetting About Survivor Benefits – Again, not every plan has the same rules. Does the survivor benefits of one spouse flow through to beneficiaries or back to ex-spouse? Make sure survivor benefits are discussed and agreed upon in final agreement.
- Not Completing a QDRO at time of divorce – A QDRO needs to be prepared and entered at the time of divorce. Do not delay until after agreements are signed.
Julia is a Certified Divorce Financial Analyst (CDFA®) who understands the many financial decisions surrounding divorce. Services are in addition to those provided by an attorney. If you are considering divorce or interested in the collaborative process, schedule an introductory consultation.
Disclosure: This is not intended to be legal advice. Please consult an attorney.
Investment advisory services offered through LW Advisors, a Registered Investment Advisor in the state of Iowa.