Qualified Domestic Relations Order (QDRO)

When parties divide a retirement account as part of the property division in a divorce or legal separation, a special document called a Qualified Domestic Relations Order may be required. This special order, usually referred to as an acronym "QDRO", allows parties to divide a retirement account while avoiding the penalties and tax implications of liquidating the retirement funds. Not all retirement accounts need to be divided via a QDRO, but many, such as military pensions, state and federal civil pensions (FERS, TERS, PERS II, etc.), and ERISA plans, including 401(k) accounts, can only be divided using a QDRO. 

Caroline routinely drafts QDROs as part of her family law practice for a wide variety of retirement accounts. Whenever possible, Caroline sends a draft of the QDRO to the plan administrator for pre-approval prior to presenting the order to the court when the divorce or legal separation is finalized. With a pre-approved QDRO, parties can be assured that there will not be unnecessary delays when the funds are transferred. 

Additionally, Caroline helps her clients think about details such as whether the parties wish to include "gains and losses" as part of the award to the other spouse. Market fluctuation can significantly affect the value of an account between the time the account is valued, an award to the other spouse is agreed upon, and the time the other spouse receives their agreed portion of the account. Including gains and losses on the amount awarded to the other spouse insulates both parties from market fluctuation by subjecting the transferred amount to the market gains and losses from the date of account valuation to the date of transfer.