Friday, September 27, 2013

Wait. The case is not over yet -- we need to divide the retirement accounts!

Qualified Domestic Relations Orders

Your retirement account -- and your spouse's retirement account -- are marital assets to be considered for division in your divorce.  Some people know this and accept it -- while some insist that they earned it and will never share it with their spouse.  However, Pennsylvania and New Jersey presumes that if it was earned during the marriage, it is marital.  

You may think that you do not have to share your hard earned retirement savings with your spouse, but you would be mistaken.  Your spouse may angrily tell you that you will never get your hands on their retirement account -  but the court will say otherwise.

Retirement accounts come in many forms: 401k, IRAs, pensions, 403b, etc.  In a divorce situation, you should first identify all retirement accounts in either spouse's name.  For purposes of gathering information at this stage, you should understand the details about all retirement accounts in either spouse's name, even if they were started or earned before the marriage. If you do not know what accounts exist or you cannot find the information, your attorney will be able to find the information for you in the discovery process.  However, doing the preliminary investigative work yourself may save some attorney fees.

Retirement accounts are protected by federal law and as such, there are specific and detailed laws regarding withdrawals and other changes to these types of accounts.  When a retirement account must be divided between two spouses incident to a divorce, the mechanism used is a Qualified Domestic Relations Order, commonly called a QDRO (prounounced "Quadro" or "Cudro"). This order directs the administrator of the plan how to divide the assets in the plan and what each spouse will receive.  Some retirement accounts may allow the division by filling out a form and submitting the divorce decree.  This is sometimes allowed at a brokerage, such as Vanguard, and avoids the time and money necessary for the preparation of a QDRO.

Preparation of a QDRO from initiation to final completion, takes many steps. First, the QDRO must be drafted, using the necessary statements and information from the plan administrator.  Your divorce lawyer usually does not actually draft this document.  Rather, you and your spouse must hire a specialist as the documents are complex.

Once the QDRO is drafted, it is sent to the retirement Plan Administrator for their approval of the form.  Sometimes, the Plan Administrator will propose changes.  Once the Plan Administrator approves it, each party signs it and it is then sent to the court for a judge’s signature and to be docketed.

When the court returns the file-stamped, signed QDRO, the parties send it to the Plan Administrator, who effectuates the division.

These multiple steps can take months, and in some cases over a year.  The back and forth can be extremely tedious and time consuming.  Stay on top of the procedure, to keep it moving along.  Remember that this final step can usually occur after the divorce.

1 comment:

lola davis said...

Thanks for sharing! This page was very informative and I enjoyed it. divorce and mediation Long Island