Will I Need a QDRO?
A Qualified Domestic Relations Order, also known as a QDRO, is often necessary during the divorce process to appoint a non-employee spouse as the alternate payee of a retirement plan. A QDRO allows the assets of a retirement plan to be divided without suffering the usual 10% early withdrawal penalty fee, regardless of either party’s age. If you and your spouse are not dividing retirement assets, you will not need a QDRO during the divorce process.
What You Need to Know About a QDRO
If you are dividing retirement assets, you should hire an experienced divorce attorney to ensure you do not make any unnecessary errors during this process. Even the smallest mistakes can result in you facing penalty charges.
To have a valid QDRO, the state must enter a decree or judgment to approve it. It must also be recognized under The Employee Retirement Security Act (ERISA). The alternate payee of retirement assets does not necessarily need to be your former spouse. An alternate payee can be a child or other dependent.
Your QDRO must include:
- The mailing address and name of the plan’s owner
- The mailing address and name of the alternate payee
- The percentage of assets the alternate payee is receiving
- How the percentage was determined
- The number of payments the payee will receive
- How the payments will be distributed
What Should I Do with QDRO Assets?
If you are receiving retirement assets through a QDRO, you are probably wondering what to do with them. There are actually several options available. If you wish to have the assets available as soon as possible, you can receive it as a single lump sum and pay the taxes on it. If you can afford to wait, however, it would be best. Keeping these assets in a qualified retirement plan will give it the chance to continue to grow and you can hold off on paying taxes until retirement.
Additionally, you could keep the money in a rollover IRA and keep the assets tax-deferred and entirely under your control. Examine your financial situation to determine which of these options best suits you and your financial future.
Learn More About QDROs During a Free Consultation Today!
If you are getting a divorce and have retirement assets, you will need an experienced family law attorney who will help you divide your assets with a QDRO. The process can be complicated and, given the importance of these assets, you should avoid making any errors that could result in unnecessary penalties. At Hedayati Law Group P.C., our legal team is backed by more than 150 years of combined legal experience and a long record of successful results, so you can trust your case will be in the best hands when you choose to work with us.
Get started on your case today and contact our law firm at (631) 880-6440 for a free consultation with one of our knowledgeable attorneys. All of our services are provided at competitively-priced fees!