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What should divorcing spouses know about QDROs?

On Behalf of | Mar 30, 2020 | Property Division |

Dividing marital property can be one of the most challenging aspects of divorce. Spouses often disagree about how to divide the equity in the house and what to do with their shared bank account.

Things can become even more stressful when it comes to dividing retirement accounts. People spend years saving up for their retirement, but retirement accounts are usually categorized as marital property. So, what do individuals need to know about dividing their retirement?

Most of the time, spouses need a QDRO

Dividing an employment-based retirement account equitably under North Carolina laws usually requires a qualified domestic relations order (QDRO). This order gives an individual the right to receive their share of their ex-spouse’s retirement that was earned during the marriage.

However, much more goes into a QDRO than that. These documents require precise language that can differ for different employers and different types of accounts. That is why it is often beneficial to consult an experienced divorce attorney in these situations.

QDROs are a separate document than the order or agreement resolving property division

Property division cases, especially those involving many assets, can be time-consuming and complicated. At the end of the case, many people may forget to tie up loose ends like having QDROs done. It is common for people to think that if the order or agreement says they get an amount from their spouse’s retirement, that the order or agreement is enough to entitle them to that.

Unfortunately, that is not the case. The QDRO is the document that actually transfers the funds to the person that is supposed to receive them and ensures that the transfer itself is not taxable to either person 

There are many different types of retirement division orders other than QDROs

Not all retirement plans are “qualified plans.” For accounts that are not “qualified plans” a Domestic Relations Order (DRO) rather than a QDRO is needed. While these documents serve the same purpose, they are not the same. These types of plans may include the following:

  • Pensions, which generally entitle an ex-spouse to receive a percentage of their spouse’s monthly pension payment based on their percentage share;
  • Military Retirement (sometimes called a Court Order Acceptable for Processing rather than a DRO)
  • State or Government Plans (such as Local Government Employee Retirement System and Teachers Employee Retirement System, commonly referred to as LGERS Pension Orders or TSERS Pension Orders)
  • Federal Employee Retirement Plans (sometimes referred to as a Qualifying Benefits Court Order)
  • Individual Retirement Accounts (sometimes referred to as an IRA Rollover Order)

Obtaining a retirement division order is only one of the many details that spouses must consider when pursuing a divorce, but it is certainly an important one to ensure individuals are prepared for their futures post-divorce. If you have retirement plans or accounts that need to be divided as part of your divorce, you should make sure you obtain sound advice from an attorney who has experience in this area.