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What is a QDRO?

On Behalf of | Jun 22, 2018 | Divorce & High Asset Divorce |

Like many in Southport, you may find it hard to understand the notion of your 401k being an asset that is subject to property division. After all, your account is any available through your employer and is typically supported solely by your income (as well as any matching funds offered by your employer). Why, then, would it be considered a marital asset? Think of it along the same lines as your earned income. Whatever you made while married is marital income, and given that your contributions to your 401k came from that income, it makes more then as to why its viewed this way. 

So now that your better understand it, what is the best way to divide those portions subject to division up equally. One method recommended by the 401k Help Center is to submit a Qualified Domestic Relations Order to your plan administrator. A QDRO is a document endorsed by the court which allows your plan administrator to distribute funds from your retirement account to an alternate payee. Any distributions made under the QDRO are not subject to early withdrawal penalties; it simply stipulates how much to disperse to your ex-spouse. He or she can do whatever he or she wants with his or her portion; you can continue to contribute to and grow your 401k. 

Drafting a QDRO should be viewed as a simple formality, however. A good deal of attention should be dedicated to it to ensure that is complies with your plan’s guidelines. Thus, while your attorney may be the one writing your QDRO, your plan administrator should also be involved. It should stipulate an exact amount owed as opposed to a percentage; stipulating a percentage would allow your ex-spouse’s share to grow in the time between submitting the document and its formalization and approval. 

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