After the stress of coming to a decision to end a marriage, couples have to start thinking about the emotional, physical and financial losses of a divorce. However, you may still be able to prevent some significant degree of loss. For example, you can prevent loss from taxes and penalties that are charged when retirement account funds are improperly handled. Call a family law attorney (832) 390-4414.
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QDRO Services
During the process of getting a divorce, the retirement accounts are often split because they are part of an agreed upon property division settlement. But a spouse may decide to use the money to pay child support or make alimony payments. Depending on the documentation used for these transactions, that spouse may or may not lose some of the funds to early withdrawal fees, penalties and income taxes.
QDRO Preparation Services
If you are an account holder that meets retirement criteria, you can withdraw money from a 401 (k) or any corporate managed retirement account without incurring penalties. But those that do not meet these criteria can avoid losing some of their monetary savings to taxes and penalties by utilizing a Qualified Domestic Relations Order (QDRO).
QDRO Review
QDRO is a document drafted in a specific way that sets up another person as a qualified payee on an account. It is basically a court order that guarantees that more than one person can use the retirement savings. The Internal Revenue Service indicates that a QDRO can allow 401(k) assets to be used for child support or spousal support.
The alternate payee can be an ex-spouse, spouse, child or other dependent. The document must be structured in a certain way to be approved. It must include:
- How that percentage is determined
- The way the payments are to be made
- The name and mailing address of the plan owner
- Alternate payee’s name and mailing address
- The number of payments included in the order
It will only be considered valid if it has been correctly verified. The QDRO document is given to the plan administrator to execute the plan after the document has been approved. A resourceful lawyer can draft a QDRO on your behalf to avoid complications. You may face a tax assessment of up to 10 percent on the withdrawn amount if you do not use a QDRO.
QDRO during a divorce
When the divorcing parties are identifying assets to be divided, they will have to decide on the portion of the retirement accounts that the payee can claim. Of course, the court can decide that for the former spouses. After the share has been awarded, the court will issue a QDRO that will most likely be drafted by your attorney.
You should ask the court for a share of your ex-spouse’s retirement account through a QDRO. Give your lawyer all the details about your former spouse’s retirement account assets. This way the lawyer can prepare to help you fight for a share of it.
Waiting too long to do this will only complicate things if the ex-spouse dies without designating you as a payee.
However, there are terms of use and requirements for preparing and filing a QDRO. The QDRO may be declared invalid if these terms and requirements are not followed completely. That is why you need a lawyer to guide you.
