In last week’s post, we discussed the option of collaborative divorce as a strategy for protecting one’s financial privacy during divorce. Yet some court involvement is always necessary in a divorce, such as approving settlement agreements negotiated by the parties. A court order is also required if a couple divides their retirement benefits using a qualified domestic relations order.
As authorized by the Employee Retirement Income Security Act of 1974 (ERISA), QDROs provide a legal exception to the general rule against assigning away one’s interest in a retirement plan. A QDRO allows an individual to use his or her retirement benefits as a source of satisfying marital property or support obligations. An individual may assign some or even all of his or her retirement benefits to a spouse, child, former spouse or other dependent.
QDROs are often issued in divorce proceedings, but a court can also issue them as a separate domestic relations order. Since QDROs involve both federal and state law, however, our divorce law firm recommends consulting with an attorney who has experience with complex or high-asset property division matters.
There are several ways that a QDRO might divide retirement benefits, and factors such as the type of plan (defined benefit or defined contribution), the amount of benefit paid for retirement purposes, any survivor’s benefit, and the purpose of the QDRO must be considered. For example, using a QDRO to provide temporary spousal support is a very different goal than dividing marital property. The former approach might involve payments from the QDRO for only a limited time; the latter approach might actually split the benefits from the retirement plan, sometimes called a shared payment approach.
In our next post, we take a closer look at other ways QDROs can be used to divide marital property in a divorce.
Source: “QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders,” copyright 2014, U.S. Department of Labor