July 22, 2022

Do I Need a QDRO to Protect My Retirement Plans in a Divorce?

You may not have expected a late-in-life divorce, but you are reaching retirement and have found that now that your nest is empty you do not have the same relationship you once had with your spouse.

If you are in your 50s and are facing divorce in Michigan you will want to make sure you know what will happen to your retirement accounts in the property division process. This way, you can ensure you will be able to retire as you have planned prior to your divorce.

The basics on QDROs

Did you know that you have an ownership interest in your spouse’s employer-sponsored retirement accounts, and vice versa? This may include 401(k) accounts, pensions and other types of accounts. You will want to protect your shares in these accounts. To do so, you will want a qualified domestic relations order (QDRO).

A QDRO is a court order that directs your spouse’s pension or 401(k) on how to allocate to you your share of these benefits. A QDRO also allows these funds to be withdrawn without incurring a penalty as long as they are placed in a retirement account such as an IRA and you are over age 59-and-a-half. You do not need a QDRO to divide IRAs.

QDROs must be sanctioned both by the plan administrator and the court. Many people seeking a QDRO choose to work with an attorney. The language of the QDRO must agree with the language of the retirement plan being divided.

QDROs protect your interests

QDROs protect your interest in your spouse’s retirement accounts and your interest in your own retirement accounts. Simply dividing these assets in your divorce decree is not enough to protect you from incurring penalties. QDROs can be complex and must be worded right to be effective, so you may want to work with a professional if you need a QDRO.