The chances are good that one of your most valuable assets is a retirement account or pension plan. Retirement plans funded during a marriage are considered marital property. This means, if you divorce, each spouse is entitled to receive a share.
However, more than a court order in a divorce decree is needed to get a fund administrator to pay a portion to a former spouse of the plan’s owner. Only a document called a Qualified Domestic Relations Order can guarantee a former spouse that they will receive a portion of the funds.
A Buckhead Qualified Domestic Relations Order (QDRO) lawyer understands this specialized area of the law. They can ensure that the fund administrator receives a QDRO that accurately reflects the property division arrangement you and your spouse agreed on, or the judge ordered. Call our firm today to schedule an appointment with a dedicated division of assets attorney to learn more about your legal options.
A federal law, the Employee Retirement Income Security Act (ERISA), covers many employer-sponsored retirement savings vehicles, such as 401k plans and defined pension benefit plans. Military and government pensions do not fall under ERISA.
A person with a 401k, 403b, or ERISA-governed pension is considered the plan participant or account owner. They designate a beneficiary to receive the funds if they die. ERISA prevents a plan administrator from paying any portion of the funds to someone other than the owner while the owner is alive.
If an account owner gets divorced, their former spouse could have an interest in the funds. However, if the owner takes out the money and gives it to the former spouse, the owner will be liable for any taxes. A QDRO directs the plan administrator to pay the former spouse a portion of the funds. Doing so allows a non-owner to receive the funds directly and transfers the tax liability to them. A seasoned Buckhead attorney can help individuals understand more about the laws governing the division of pension and retirement plans and when a QDRO is needed.
Divorcing spouses might have to divide one or more ERISA-governed accounts to achieve an equitable split of their marital property. Each plan has different requirements about the contents of a QDRO. Many plans have a QDRO template they require owners to use. Others accept any form that contains the required information.
A Buckhead attorney can investigate the plan administrator’s requirements for QDROs. They can draft a Domestic Relations Order (DRO) that conforms to the administrator’s direction, have the parties sign it, and submit it to Georgia courts. The judge reviews the draft DRO, signs it, and returns the signed order to the attorney.
The legal professional then submits the family court-approved draft to the plan administrator. If the administrator finds the DRO meets their plan’s requirements, they approve it, and it becomes qualified – a QDRO. If the administrator rejects the draft, the attorney must draft a revised DRO, and the process begins again. Working with an attorney experienced in drafting these agreements could prevent this result.
One purpose of having a QDRO is to ensure that the person who receives the money pays the taxes on it. However, a QDRO is also necessary to protect a former spouse’s interest in the account owner’s ERISA-governed funds. A Buckhead attorney can explain how a QDRO protects both parties to a property division agreement.
If no QDRO exists, the account owner could empty the account and spend the money, leaving the former spouse without access to that asset. Similarly, if the account owner secures a loan with their retirement fund without a QDRO, the former spouse might not receive all the money the divorce decree directed. The owner’s death or remarriage also might impact the availability of the funds if there is no QDRO.
A carefully drafted QDRO ensures that the account owner cannot remove or encumber the portion of the fund that should go to the former spouse. Many former spouses immediately roll their share over into an Individual Retirement Account (IRA), but even if the former spouse does remove the funds for years, a QDRO protects them.
If you are divorcing and an employer-sponsored retirement fund is part of your property settlement, you will need a QDRO. It is wise to begin this process as soon as you have reached an agreement with your spouse.
A Buckhead Qualified Domestic Relations Order (QDRO) lawyer can draft a document that protects both parties and meets the plan administrator’s requirements. Call today to speak with a skilled member of our team to learn more about your options.