QUALIFIED DOMESTIC RELATION ORDERS (QDROs)
Maryland Family Law Attorney Explains Qualified Domestic Relation Orders
What is a QDRO (Qualified Domestic Relation Order)
During divorce, assets, properties and debts are divided between the two parties. It can be quite complicated to separate two lives that have been entangled for multiple years, even more so for relationships that lasted decades. Besides physical property and basic finances, many assets may be on the table for sharing or forfeiting when spouses divorce. Additional assets that may be involved in a divorce is a pension or retirement plan. The state of Maryland permits retirement assets to be transferred from one spouse to another during divorce which a Maryland family law attorney can explain more depending on your case.
A QDRO (“quad-row”), or Qualified Domestic Relations Order, is a type of court order which permits an individual who is not the pension or retirement plan holder to receive all or part of the payouts of this plan. There are many reasons why a divorcing couple may end up using a QDRO.
It is very important to seek legal advice from a knowledgeable group or Maryland family law attorney in the case of a divorce involving retirement or pension plans. Dividing these plans can be very complicated and legal advice may be necessary in order to knowledgeably draft a QDRO that the court will approve.
Typically, QRDOs are used to:
- Provide support payments
- Divide retirement or pension plans accumulated during the marriage
When two divorcing parties are not able to agree on the division of a retirement or pension plan, the court will settle it. Even when the two parties come to their own agreement, a court order is almost always necessary for the division to be considered complete since a QDRO is required to be issued by a “state authority,” which includes the court.
Some retirement assets can be divided by rolling over from one retirement account to another. The receiving spouse may decide to receive cash instead of retirement funds, but this can trigger taxes and may lead to penalties. Other assets, such as pensions and pension benefits may be transferred to the receiving spouse.
The insurance company which holds the retirement or pension plan is involved in deciding whether the details of the QDRO draft are acceptable. They may review the draft before it’s submitted to the court, which may require a review fee, or it may review after the QDRO has been accepted by the court. If the insurance company rejects the QDRO, it will have to go back through the drafting and submission process. The process can get complicated so it’s best to consult with a Maryland family law attorney for legal help.
It is important to consider the timing of the submission of a QDRO to the court as it relates to the timing of the granting of a divorce. Once the divorce has been granted, there is no reason that the employee spouse should give up or share his or her retirement or pension plan with his or her now ex-spouse. As QDROs are complicated, it’s important to begin the process early.
Pension QDRO Options
When dividing a pension, the exact methods will depend on whether the purpose of the QDRO is to support an ex-spouse or is a part of a settlement agreement.
When the QDRO is used in part of a settlement agreement, the total benefit is typically split in two parts. This completely separates the plan participant from the alternate payee, permitting separate scheduling and method of payout. On the other hand, when the QDRO is intended to support the ex-spouse, it is possible to divide each benefit payment. This means that whenever the participant spouse receives their payout, a portion goes to the supported spouse. In this method, the supported spouse receives payment at the same time and in the same manner as the plan participant spouse.
Retirement Plan Complexity
The complexity of the retirement plan has a direct effect on the complexity, and consequently the price, of drafting a QDRO. Defined contribution retirement plans, such as 403(b) and IRAs, are simpler and less expensive to draft. Pension plans, such as government, public, or private company pensions, come in a huge variety and therefore may be extremely complicated. It’s important to seek legal advice from a Maryland family law attorney so you know your options.
Paperwork to Bring to Your Maryland Family Law Attorney
When you are going to see a lawyer about drafting a QDRO, be sure to bring the following documents:
- The plan summary booklet for each plan
- The plan document for each plan
- Proof of the relationship and the relationship of any children to the participating individual
- A current statement of all retirement and pension plan assets
Drafting a QDRO is a very complicated and significant process during a divorce. Be sure to have all the information you need to make the best informed decision. The best way to be informed is to speak to a Maryland family law attorney who is familiar with QDROs and has experience.
Seek Legal Advice from a Maryland Family Law Attorney Now
The Burton Firm represents clients all throughout Maryland and the greater area. We have the skills and expertise of handle all types of cases pertaining to family law. Give us a call at (301) 420-5540 to speak to a Maryland family law attorney about qualified domestic relation orders or anything else pertaining to family law.