A QDRO (Qualified Domestic Relations Order) is a legal document that is brought forward during the settlement of a divorce that establishes a payee that gets compensated to receive a portion or grand total of the retirement benefits of an employee such as a pension or 401K plan.
In most divorces, property that was acquired during the marriage is considered marital property and is subject to division between the spouses depending on a number of factors, most importantly pertaining to when the asset was acquired and the value it held in the financial relationship.
The way property is divided can depend on a number of factors. In the context of a divorce, a QDRO can be used to divide retirement assets between the two spouses as a part of the property settlement. The QDRO sets out the specific terms of the division, including the amount or percentage of the benefits to be paid as well as the time period in which the payments will get drawn out.
What is the importance of a QDRO?
QDROs are necessary because retirement benefits are usually considered to be the legal property of the employee at hand and cannot be distributed to another person/ third party without proper legal documentation and authorization.
A QDRO provides this authorization which allows for a former spouse or child of that employee to receive a share of the retirement benefits that they might be entitled to as part of the divorce settlement.
QDROs are very complex and must comply with specific requirements under federal and state law, so it is highly recommended that you consult with a qualified attorney or financial advisor in order to review your QDRO and help you take the necessary steps forward.
For more on this topic, check out the podcast episode with Derrick A. Rubin, Esq., a certified lawyer who specializes in divorce and marital legal proceedings.
