What Is A QDRO And Why Do I Need One?

A QDRO (pronounced QUAD-ro) is a Qualified Domestic Relations Order, and whether you need one or not depends upon the type of property to be divided in your divorce. As you may know, the court in a Kentucky divorce has the authority to divide the marital property between the parties in any manner which the judge determines is fair and equitable. Marital property, as opposed to separate property, typically includes all property acquired by either spouse during the marriage, with some exceptions. Therefore, the income or wages of either spouse earned during the marriage is marital property, and this income can include a spouse’s earnings in a retirement or pension plan. This is where a QDRO comes in.

Pensions, 401(k) plans and similar plans are regulated by the federal government and governed by a plan administrator according to certain rules. Under these rules, the plan administrator will not be able to transfer any interest in a benefit plan without a court order accompanied by specific instructions on how the benefits are to be divided. A QDRO provides those necessary instructions. QDROs are generally required for any defined contribution plan, like a profit sharing plan or 401(k), or a defined benefit plan, such as a pension or retirement plan

What about IRAs?

Assets in an Individual Retirement Account (IRA) or other deferred compensation account can usually be divided without a QDRO and without incurring tax liability as a transfer incident to divorce, pursuant to a written divorce decree or Marital Settlement Agreement. A cash out approach is another means which may be available to divide or transfer assets in an IRA.

Who Drafts the QDRO?

Your divorce attorney can draft any QDRO which may be required. Having an experienced divorce attorney draft the QDRO will help ensure that your marital property and separate property are accurately analyzed and treated properly, and that the distribution of marital property is truly fair to you. In Florence and Northern Kentucky, contact Greta Hoffman & Associates for assistance at 859-535-0264.