Even though retirement plans can be one of the most beneficial things about a marriage, many spouses forget about or overlook retirement plans during the process of divorce. Spouses are especially prone to overlooking retirement plans when they're going through the divorce process years or even decades before retirement. If you're currently in the process of divorce, here is some information about why you should not overlook the importance of a QDRO.
A qualified domestic relations order refers to a special court order that provides an individual with the right to a portion of their former spouse's retirement benefits. In general, these retirement benefits are earned by the former spouse by participating in a retirement plan sponsored by an employer. Usually, QDROs are established during the divorce process. However, in some cases, QDROs are established years after the divorce.
When it comes to QDROs, the individual who earned the retirement benefit is referred to as the "participant" while the individual who will receive a portion of the benefit is referred to as the "alternate payee." The alternate payee can receive benefits from the QDROs whether the participant is alive or deceased. According to federal law, a QDRO is required to split retirement benefits between former spouses. Therefore, it is often not enough for the state court to issue a divorce decree.
As stated above, it is possible to get a QDRO after a divorce decree has been issued. However, it is ideal to obtain a QDRO during the divorce process. If a participant retires after the finalization of a report and there is no QDRO associated with the retirement plan, said plan will start to pay the benefit to the participant. At this point, it may be too late for the former spouse to file a ODRO.
As you can see, the importance of the QDRO cannot be stressed enough. For more information about the importance of the QDRO, don't hesitate to contact a skilled family law attorney.