How a Qualified Domestic Relations Order (QDRO) Can Protect Your Rights
Divorce is the sign of a dying relationship and it is really hard to decide what one should walk away with but you and your spouse should accept the reality and divide the property that you have collected during your marriage. Another factor during a divorce is the retirement property or savings that you own. These are very delicate issues where you have to protect your share, if your spouse is an employee and she has a retirement plan such as 401(k) then she is entitled to share the money with you legally. But how can you protect your money from your spouse?
There is a way to do it, with the help of QDRO (Qualified Domestic Relations Order) you can save your interests. A QDRO helps you to get your share of property, or alimony which provides financial support to husband or wife after divorce and instructs your wife to pay your share to you. It is a court order that your wife has to follow. A QDRO can be used only for financial plans that apply to IRS tax qualification and recognized by ERISA (Employee Retirement Income Security Act) but it isn’t applicable to government pensions as they come under other laws. There are ways to break the QDRO protection also.
Most of the retirement plans have QDRO form that could be used by your lawyer to get you your share but if your share in your wife’s retirement plan is a considerable amount then you should choose to go for attorney. An attorney is the one who is specialized in QDRO and he can ensure you that you’re your share is fully protected that an initial QDRO form cannot guarantee. The other side of this is that if your attorney is not an experienced person then it would take him time to work things out and will cost you more fees and if he misses some important point you could lose a lot of money.
If your spouse has defined benefit plan then your lawyer will have to hire an actuary to perform the calculation on your share. These plans involve complex calculations such as the no. of years that you have been employed, etc.
Defined contribution plan assets are easier to calculate than defined benefit plan assets because defined benefit plan payments are based on complex actuarial calculations and factors such as years of employment. If your spouse has this type of plan, your lawyer will probably have to hire an actuary to calculate your share of the plan assets.
Your lawyer should read the plan’s summary plan description and other plan documents because the QDRO’s terms must agree with the terms of the plan. The issues related to defined contribution plans are different than those related to defined benefit plans, another reason it helps to use a specialist. If your spouse has taken up 401(k) plan then there two modes of payment one lump sum payment immediately and the other in the future and in company pension plan you would receive the payments at your usual retiring age.
VandeNikhilam USA » Dividing Retirement Plan Assets in a Divorce 1:19 am on July 4, 2009 Permalink
[...] more: Dividing Retirement Plan Assets in a Divorce This entry is filed under Divorce, PR. You can follow any responses to this entry through the [...]