Unraveling the Whys & Hows of QDROs

Divorce is a challenging journey, filled with emotional and financial complexities. The division of marital assets is a pivotal aspect of the divorce process. One powerful tool that can help navigate the intricate landscape of asset division is the Qualified Domestic Relations Order, or “QDRO.”

A QDRO is a legal document that recognizes that a spouse, former spouse, child, or other dependent is entitled to receive a portion of the account owner’s retirement plan or pension benefits. QDROs are used in divorce proceedings to ensure that both parties receive their fair share of the marital property by specifying the terms of how retirement benefits should be divided between the divorcing parties. With a QDRO in place, the division of retirement assets is clear and legally binding, providing protection for both parties. More importantly, while the division of marital property is generally governed by state law, transfers of retirement interests must comply with federal law (such as ERISA) and the Internal Revenue Code, which require the use of QDROS.

What are the steps to implement a QDRO in New Jersey?

  1. Consult an Attorney: The first step in utilizing a QDRO is to consult with an experienced family law attorney. They will guide you through the process and ensure that all legal requirements are met.
  2. Identify the Retirement Accounts: Determine which retirement accounts are subject to division. This can include 401(k)s, 403(b)s, pensions, annuities, and other qualified plans.
  3. Draft the QDRO: Usually, a third-party company hired by the parties will draft the QDRO, which specifies the terms of the division, including the percentage or dollar amount to be allocated to the alternate payee. Your attorney will review the drafted QDRO to ensure accuracy.
  4. Court Approval: The QDRO must be submitted to the court for approval as part of the divorce proceedings. The judge will review and approve the order.
  5. Plan Administrator Approval: Once the court approves the QDRO, it must be sent to the plan administrator of the retirement account for their review and acceptance.
  6. Implementation: After receiving approval from the plan administrator, the QDRO is implemented, and the division of retirement assets can proceed.

This process is repeated for each account that is to be divided by QDRO.

In a divorce, ensuring the fair and legal division of marital assets is crucial, and QDROs offer a clear and legally binding solution for dividing retirement accounts. The experienced family law attorneys at Cohn Lifland Pearlman Herrmann & Knopf LLP can assist you with navigating the QDRO process correctly, easing the transition into the next chapter of your life.