What is a QDRO?
Under certain circumstances in a divorce, a spouse may request a qualified domestic relations order (QDRO) which divides a spouse’s retirement assets. If you are seeking a divorce, contact a qualified Nassau County Division of Assets Attorney who can help you protect your hard-earned assets. Our firm is committed to helping our clients protect their retirement benefits.
What does a qualified domestic relations order (QDRO) mean in a divorce?
A qualified domestic relations order (QDRO) is a court-ordered judgment made in divorce cases that requires a retirement plan to pay for child support, alimony, or marital property rights to a dependent. This decree allows spouses to receive a certain amount of their ex’s retirement plan assets. Individuals must file a QDRO to receive a portion of their spouse’s retirement assets. However, in certain cases, individuals’ request for a QDRO is denied based on disinformation. If a spouse’s QDRO request is accepted, they may receive up to 50% of their ex’s retirement benefits. The division of retirement assets ultimately depends on the type of retirement plan they have. A QDRO must act by the Employee Retirement Income Security Act (ERISA). Additionally, a QDRO must comply with New York’s domestic relations laws. Domestic relations laws are enforced to protect beneficiaries.
Who is considered to be an alternate payee?
Spouses who are granted QDRO decrees are referred to as alternate payees. This means they lawfully will receive a portion of their former spouse’s retirement assets. However, former spouses are not the only individuals who may be alternate payees. QDROs may also be assigned to fund a child. This means a portion of retirement benefits in a QDRO would cover the amount owed in child support. Although it can be used to pay a portion of child support or alimony, it is typically used in the distribution of marital property. An advantage of a QDRO is that it transfers marital property rights.
What are the benefits?
There are several benefits of a QDRO in a divorce. Firstly, the decree effectively transfers retirement benefits. Another benefit of a QDRO is that there are no tax penalties for early withdrawal. The IRS typically would charge a certain tax penalty if money is withdrawn before a certain age, however, that is not the case with a QDRO. Additionally, when a beneficiary receives their funds it is not taxed. Although there are several benefits of a QDRO there are also several limitations. A limitation of a QDRO is former spouses can not acquire any funds that have been added due to a benefit change once a QDRO is established. They can only receive a portion of their ex’s current retirement plan. Ultimately, a QDRO can be extremely beneficial for dependent spouses.
If you are seeking a divorce and are worried about your finances, reach out to our skilled team members who can help you understand what a QDRO decree entails.