Hartley Law Office, LLC

Hartley Law Office, LLC

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How does a QDRO work?

One of the most valuable assets that a Dayton, Ohio, couple may have between them is their respective retirement plans, such as 401(k)s, pensions and the like. Those who regularly contribute to these plans can amass tens of thousands of dollars as they get closer and closer to retirement.

Therefore, it is not a surprise that retirement plans are a big issue when an Ohio couple over the age of 50 opts to divorce or legally separate. While they are subject to a fair and equitable property division just like other assets and debts, there are some special rules and principles that apply to them.

The reason there are special rules is that these retirement plans carry with them special tax advantages that should be protected during the property division process. Moreover, these plans are commonly managed by third parties, like a plan administrator, who is obviously not a party to the divorce and thus not automatically subject to the court's orders.

As such, even if a couple is able to agree about how a retirement plan is to be divided in the event of a divorce, there is still some important legal work that may be required. Among other steps, one attorney will likely have to prepare and get the judge to sign a qualified domestic relations order, or QDRO.

The order will direct the plan administrator to divvy up the retirement plan in a certain way, even if doing so means that some of the proceeds are going to an employee's former spouse who otherwise would not be eligible to benefit from the plan. Assuming that the QDRO is in a proper form for tax and other purposes, the plan administrator will accept and act specifically according to the instructions in the QDRO.

The careful preparation of a QDRO is a critical step in the property division process. If an attorney or other person makes a mis-step in drafting it, there could be delays or, at worst, an unplanned, and bad, financial consequence.

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