If you’re going through a divorce or legal separation, and you and/or your spouse have retirement accounts, you’ll likely hear something from the court or your attorney about a Qualified Domestic Relations Order, more commonly known as a QDRO.
QDROs are the orders that direct the parties and the Plan Administrator(s) of their retirement account(s) as to how the accounts are to be divided between the parties after a divorce or legal separation.
The Division of Retirement Benefits in Divorce or Legal Separation
Most retirement assets and benefits are protected from creditors and have significant limitations on transfers or withdrawals, but there is an exception to these limits: the division of retirement benefits in a divorce or legal separation. Retirement assets and benefits can also be subject to and used for payment of child support and spousal maintenance.
A Qualified Domestic Relations Order (“QDRO”), or like order, is a court directive to a plan administrator of the retirement asset or benefit that defines how the parties’ retirement accounts will be divided and how they will be allocated to the non-employee party after a divorce.
Why do I need a QDRO?
Divorce in Arizona and Community Property Laws
In Arizona, all assets acquired during the marriage is presumed to be community property and should be divided equally 50/50 between the parties. “During the marriage” is defined as the period from the date of marriage to the date of service, or the date a spouse is served with the Petition for Dissolution of Marriage or Petition for Legal Separation.
Contributions to retirement accounts and benefits during the marriage, which include monetary contributions by a spouse, matches by their employer, and increased benefits to a pension as the result of years worked or purchased (“service time”), all are considered as community property or assets acquired during the marriage and are therefore subject to division in a divorce or legal separation.
If you were contributing to a retirement account before your marriage, anything earned up to the date of marriage is considered your sole and separate property. Likewise, any contributions or service time accrued after the date of service is also considered your sole and separate property.
The Steps for Preparing and Completing a QDRO
In preparation of the QDRO or other similar order, in addition to determining the proper order needed and requirements for the same, calculations are made as to the community portion of the specified retirement account and how it will be divided between the parties. These calculations are complex and are best completed by an experienced QDRO attorney.
There are many steps to preparing and completing a QDRO, which include the following:
- The parties and their counsel will determine how the retirement assets will be divided and the applicable QDROs will be prepared. Which types of accounts, and how many, do each of the parties hold? What types of orders will be prepared and what are the requirements for those orders?
- A QDRO preparer will draft the QDRO (or other like order). Calculations will be made as to the community portion of the specified retirement account and how it will be divided between the parties. These calculations are complex and are best completed by an experienced QDRO attorney.
- Once prepared, the QDRO will be filed with the court, then the Order will be entered by the judge.
- Once the Order has been entered, it is sent to the Plan Administrator of the employee spouse’s plan or benefits for the purpose of executing the QDRO. The Plan Administrator will determine whether the QDRO meets the requirements of the particular plan it was prepared for. If it does not, the QDRO may be rejected and the parties will be required to go through the preparation process again to address the relevant issues.
- When the QDRO is accepted by the Administrator, they will implement the division and payment instructions according to the order and the requirements of retirement plan
The above breakdown of the QDRO preparation process is highly simplified, and there are many complex considerations made along the way. To learn more in-depth about The Process of Preparing and Completing a QDRO, click here.
Preparing a QDRO that is Drafted Property, Will be Accepted, and is Enforceable
Every divorce and legal separation case is different, as are the parties involved and their respective retirement plans. For many of us, our retirement assets or benefits may be of significant value, therefore the calculation and division of the same is of the utmost importance.
Our very own Max N. Hanson, Esq. has completed significant coursework and passed proctored exams that have qualified him for making the complex, difficult calculations and determinations that are requisite for QDRO preparation. His 25-year career as a family law attorney and his aforementioned qualifications make him an excellent choice as a QDRO preparer.
Schedule a FREE, 30-minute Legal Consultation
If you’re going through your own divorce or legal separation, we are here for you. Whether you need full representation or just need assistance with drafting a QDRO, our attorneys at Owens & Perkins have the experience, skill, and tenacity to help you resolve your case. Call us today at 480.994.8824.
Learn More About Qualified Domestic Relations Orders: