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The Reason For Having A Qualified Domestic Relations Order (QDRO) For Your Pension Or 401k

  • By: Eric Hannum, Esq.
  • Published: August 17, 2015
The Reason For Having A Qualified Domestic Relations Order (QDRO) For Your Pension Or 401k

A Qualified Domestic Relations Order (QDRO) is a legal order that changes a retirement plan’s ownership to allow an individual other than its original holder to receive money from it. A QDRO may change a retirement plan’s ownership to an individual’s spouse, former spouse, child, or other dependent.

A QDRO defines the beneficiaries, also known as “alternate payees” of a retirement account and outlines how each beneficiary may receive payments from the account. This can be through child support, alimony payments, or property transfers.

When A QDRO Is Signed

QDROs should be signed before a couple’s divorce is finalized but more often than not they remain incomplete at the time of the divorce due to the necessary steps required convert a Domestic Relations Order into a Qualified Domestic Relations Order. This order is part of the couple’s property division. In New Jersey, a divorcing couple’s property is divided according to the principle of equitable distribution, which means that instead of simply splitting it in half, it is divided according to each spouse’s needs and contributions to the marriage’s total net worth as well as the length of the couple’s marriage. If the court determines that the nonparticipant spouse is entitled to a portion of his or her partner’s pension or 401k, the nonparticipant spouse’s attorney signs a QDRO to allow the court to make the necessary adjustments to divide the funds.

Why Sign A QDRO?

The reason to have a QDRO is to ensure that you receive your fair share of your spouse’s retirement plan after your divorce. During the course of your marriage, you and your spouse both presumably contributed to the account with the plan to both benefit from it after your retirement. Signing one can also ensure that your children receive the financial support they need from your former spouse after your divorce.

QDROs can seem much more complicated than they actually are. The key to remember with a QDRO is that it is simply the legal process of splitting a retirement fund between a divorcing couple.

To learn more about QDROs and how your property may be divided during the divorce process, contact The Law Office of Eric B. Hannum Esq., LLC. at (732) 365-3299 to schedule your free legal consultation with our firm. We proudly serve clients in Ocean, Mercer, Middlesex, Burlington, and Monmouth counties.

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