What is a Qualified Domestic Relations Order?
In any Florida divorce the couple must divide all their marital assets, and this usually includes the division of retirement accounts. Certain retirement plans can be divided or transferred without issue, but others require a qualified domestic relations order (QDRO) in order to split or transfer the value of the account in a divorce. If you would like to discuss whether your retirement assets require a QDRO for your divorce, call or contact the Law Offices of David L. Hirschberg in Boca Raton today to schedule a free consultation of your case.
How Does a QDRO Work?
A qualified domestic relations order is a decree that is submitted with the finalized divorce paperwork to the court to order that a retirement plan be split or fully transferred to pay for the child support, alimony, or in the distribution of marital assets in a divorce. This order allows the plan administrator of certain types of retirement plans to make payments to an alternate payee that is not the originating participant of the account. A QDRO can apply to benefits paid out to an alternate payee while the original participant is alive as well as survivor benefits if the original participant in the account passes away.
What Retirement Plans Do and Do Not Require a QDRO?
A qualified domestic relations order applies to all retirement funds and accounts that fall under the rules of ERISA. Qualified retirement plans, 401(k)s, and 403(b)s all require a QDRO in a Florida divorce if the account is to be split or transferred between spouses. Defined benefit and defined contribution plans necessitate a qualified domestic relations order. Employee stock ownership plans also typically require a QDRO in a divorce.
Other types of retirement accounts do not require the use of a QDRO in a divorce Individual retirement accounts (IRAs) or Roth IRAs. Certain city, county, and state retirement funds do not need a QDRO, nor do military pensions. You should always check with your lawyer and a financial advisor about what retirement accounts do or do not need a qualified domestic relations order in your divorce case.
Benefits of a QDRO
There are some significant benefits for both the original participant and the alternate payee of retirement accounts that require a qualified domestic relations order. Any early withdrawal penalty is waived for any transfers made to your spouse with a QDRO. Typically, any withdrawals prior to the participant turning 59.5 years old is subject to a ten percent penalty fee. Another benefit for the original participant is the monies are withdrawn from the original participant’s account without taxes having to be paid. Meanwhile, the spouse receiving the monies does not have to pay taxes on the monies until they liquidate/withdraw the monies received. Finally, the alternate payee can benefit from a QDRO if survivor benefits apply to the account.
Talk to Our Office Today
If you would like to speak with an experienced Boca Raton divorce attorney about whether you need a qualified domestic relations order in your case, call or contact the Law Offices of David L. Hirschberg today to schedule a free consultation.