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QDRO Basics (#1 of 5 Installments)

by Norris Law Group on February 10, 2014

qdro-attorneyHas an attorney or anyone else ever mentioned that he or she recommends that you set up  a “quadro?” This is the common pronunciation of the acronym “QDRO,” which stand for “Qualified Domestic Relations Order.”

What is a QDRO? In a previous installment of this blog, we explain the functions of a Qualified Domestic Relations Order and why you may wish to establish one.  In this series of five blogs, we will go into further detail about some of the reasons why a QDRO might be a great addition to your personal financial plan, particularly if you may be contemplating a divorce.

Qualified Domestic Relations Order: Retirement Accounts Split By Divorce

In your divorce decree, it says that your retirement benefits will be split 50/50. What does that mean exactly? How are retirement funds split? This is a more complicated question than it seems. There are several details to take into consideration and technicalities to follow, so consult a lawyer.

Most retirement accounts can be split by a qualified domestic relations order (QDRO). This is an order that creates or recognizes an alternate payee’s right to receive all or a portion of the plan participant’s benefits. In a divorce, the alternate payee is typically the ex-spouse. There are accounts that cannot be split this way: Federal Government, Railroad, and Military retirement plans. These plans are capable of being split, however, there are different rules and guidelines to follow.

Defined Benefit Plan v. Defined Contribution Plan

Since there are different types of retirement accounts, they require different QDROs. Mainly because the differences in the two different types of accounts make it virtually impossible to take care of everything one order, without creating mass amounts of confusion. The two retirement accounts categories are: defined benefit plans (i.e., pension plans) and defined contribution plans (i.e., 401(k)). Both types of accounts are split using a formula. The formula used to split a 401(k) account is very different from the formula used to split a pension account.

In our next installment, we will provide an example of a 50/50 split, and discuss the language which should be drafted into your QDRO.

Although QDROs are required by federal law, many attorneys do not draft them, based on their extremely technical requirements. Attorney Graham Norris has several years of experience drafting QDROs from private plans, government plans and the military. Other attorneys also refer their clients to Graham Norris for the drafting of QDROs. He can  draft QDROs for divorce decrees originating in Utah, Idaho, California or Wyoming. Contact his offices today at 801-932-1238 or online for a free consultation.

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