QDRO: Critical Letters in a Divorce Case

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A Qualified Domestic Relations Order divides up retirement assets. You may think yours is fair, but a Certified Divorce Financial Analyst could save you a lot of grief, and money.

When “I do” becomes “I don’t,” you might think it’s over, but it’s not. Eager to sign and get it over with? Not so fast!

There’s an important financial matter, often left to the end, that if not handled correctly can mean that finalized divorce agreement may not be in your best interest when it comes to retirement assets.

Your attorney had you sign a document called a QDRO, Qualified Domestic Relations Order, which determines how retirement assets are distributed between parties. But, although you think all is fair and equitable because you and your spouse agreed to it and because a court order has been issued, you may have lost money or may face unexpected taxes and fees.

Financial analysts can help the attorneys and the clients involved in the divorce understand the financial implications they may face.

Attorneys may refer clients to a Certified Divorce Financial Analyst to discuss and help you understand your financial situation. Your attorney knows the legalities of a divorce; however, the CDFA’s goal is to translate financial jargon of what’s fair and equitable for clients so they can make informed decisions during and after divorce.

This is an important referral, since an error on the QDRO can subject the attorney to liability and malpractice.

What is a QDRO?

  • A QDRO is a judgment or order for a retirement plan’s assets to be divided.
  • A QDRO can pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a participant.
  • The amount or percentage of the participant’s benefits to be paid to each payee varies. In states where marriage laws mandate a 50-50 division of assets, the amount paid is set. There’s a big misconception that this is law in every state, but in Florida, for example, the amount is whatever the judge decides is equitable.
  • Financial analysts understand that the QDRO can work in favor of the client and may be able to help ensure prompt transfer of retirement assets with the assistance of a neutral party, the plan administrator, who is required by federal law to facilitate the transfer or rollover within a reasonable time frame.