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Why you might need a Qualified Domestic Relations Order when divorcing

On Behalf of | Jun 13, 2021 | Property Division Issues |

When dividing assets in a divorce, you need to consider all the wealth you and your spouse own together. Some of the most valuable assets you might have are your retirement plans.

Depending on your situation, you may well be entitled to a share of your spouse’s retirement plan — but you need to proceed carefully to make sure you get what you are due. A Qualified Domestic Relations Order (QDRO) can help.

The problem with dividing retirement plans in a divorce

The problem with retirement plans, unlike many other assets, is that you are only meant to access them when you retire. If you are divorcing now, and your spouse has a retirement plan, then you want your share of it now, not in 10 or 20 years. While there are benefits to waiting until you, too, retire, the issue is that a lot can happen in that time. Your spouse may find a way to prevent you from getting your share.

A Qualified Domestic Relations Order can resolve this problem. If a court approves your request, it allows you to separate the part of their retirement plan you are entitled to from theirs. Moreover, it lets you do so now, when you divorce, not sometime in the distant future.

Using a QDRO will have tax implications

If you use a QDRO to get a portion of money from your spouse’s retirement plan, you then become responsible for paying any necessary taxes. Working with a financial advisor can help you minimize this and avoid paying unnecessary taxes where they can be legally avoided. 

There are many ways to divide property in a divorce. The key thing is to avoid focusing too much on certain items like the family home or overlook how the financial moves you seek will affect your tax bill. Property division can be complex, yet achieving a fair settlement is crucial to ensuring your future stability.