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A qualified domestic relations order (QDRO), is essentially a document that is necessary in the event of a divorce to provide the newly divorced spouse her share of her partner’s pension plan, 401(k), 403(b) and 457 or other retirement plans. This document must be issued by a state authority in order for it to be a QDRO. In most cases this document will be issued through a court. Through this legal document, the spouse is still entitled to these retirement benefits even after the divorce. However, the percentage of the benefits the spouse is eligible to receive may vary from state to state. Contact your attorney to determine how the percentage you are eligible to receive will be determined. The recipient will also be responsible for paying taxes on these benefits.
Get Your QDRO in Order Right Now
If you are currently going through the process of a divorce, you should act now to get a QDRO in place to secure your percentage of your spouse’s retirement benefits. Many people make the mistake of overlooking this document because they are under the false impression they do not need to worry about this until their former spouse reaches retirement age. However, this is a big mistake. It is also a mistake that can be quite costly in the long run.
The time to act is now because if your former spouse passes away, retires, becomes disabled, remarries, quits or is fired you may lose all of these assets. In addition to this, if your former spouse withdraws from the retirement plan or takes out a loan against these funds, you will also lose benefits. For all of these reasons you have to take action and protect yourself. If you are still going through the divorce process and a QDRO is not part of the agreement, talk to your attorney right away about having one included. If your divorce is already complete, contact your attorney immediately to see what can be done.
Information to Include in a QDRO
There is certain information that must always be included in a QDRO. The full name of the individual participating in the plan as well as his mailing address is required. The social security number of the participant and his spouse must also be included. In addition to this, the document must contain the formal name of the plan and the participant’s plan identification number if this number is not the same as the participant’s social security number. Care should be taken to ensure all information is entered into the document accurately. Inputting incorrect retirement plan information can make it difficult to obtain the funds from this plan. Likewise if the alternate payee information is not accurate, distributing funds to this individual becomes more difficult.
Quick Answers to Some Common QDRO Questions
Q. Who can be an alternate payee on a QDRO?
A. The only people who may be designated as an alternate payee in a QDRO document are the spouse, former spouse, a child or a dependent of the plan participant.
Q. What happens if the alternate payee is a minor or is not mentally competent?
A. If the QDRO names a minor or individual who is not mentally competent as the alternate payee; the payment may be issued to the legal guardian of the alternate payee.
Q. Does a QDRO have to be part of a divorce settlement?
A. Although a QDRO may be included as part of a divorce settlement, this document does not have to be issued in conjunction with a divorce decree.
Q. Can more than one retirement plan be included in a QDRO?
A. A QDRO may include multiple retirement plans as long as each plan is properly specified in the document and all necessary information is included. It should also be noted that not all retirement plans must be included in the QDRO.
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