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Considering a divorce? What about your retirement account?

Are you considering a divorce and wondering what might happen to your retirement account? If this is you, you might want to become familiar with a QDRO. It is an acronym for a Qualified Domestic Relations Order. It is a court order that allows an alternate payee, such as a spouse, ex-spouse, child or some other dependent to collect money from your retirement account.

As stated previously, a QDRO is a court-issued decree, order or judgment that acts as the formal approval of a property settlement agreement involving retirement plans. It must contain several pieces of information, including the name of the plan to which the order is applicable, the name and address of the participant and the alternate payees. It must also stipulate the percentage or method of calculating the percentage or amount to be paid to the alternate payee and the amount of time or number of payments included in the QDRO.

A judge might authorize the payment of funds from your retirement account for child support, alimony or spousal support. In some states, your retirement account may be considered community or marital property to be divided equally in a divorce. It depends on how much of the retirement funds were earned before or during the marriage. A QDRO can get complicated so it can be beneficial to consult with a divorce attorney experienced in negotiating them.

A Qualified Domestic Relations Order works by describing how retirement assets will be divided between the plans participants and alternate payees. A QDRO is also required for retirement plans covered by the Employee Retirement Income Security Act and it must be approved by the plan's administrator. And it is important to note that early-withdrawal penalties are not incurred in QDRO transfers.

Although some retirement plans provide forms you can fill out for a QDRO, there are a number of legal complexities and requirements that may apply in your state and specific situation so you may want to consult with an attorney before attempting to draft one on your own. An attorney can also ensure you draft a QDRO that is in your best interests and meets your specific needs.

Source: Reuters, "What Is a QDRO? How Divorce Affects Retirement," Andrew Chow, April 19, 2012

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