As the parties in many gray divorces discover, their property settlements may be incomplete despite getting a divorce judgment. The fact is that when there are retirement benefits at stake, a property settlement must address retirement assets.
To get your share of those when they are accessible, the plan administrators require a qualified domestic relations order (QDRO). Read on to learn more.
What it is and what it does
QDROs are part of most divorce processes. They deal solely with the plan member’s retirement benefits and the share of those that will go to their spouse and other dependent family members.
QDROs are legal documents that are separate from typical property settlement agreements. Plan administrators do not recognize regular court orders when it comes to divvying up pieces of the retirement pie. Without these specific orders, you could be denied access to your ex’s benefits.
Are taxes deducted?
The Internal Revenue Service (IRS) indeed collects taxes from both plan members and their dependents and ex-spouses. For their purposes, they treat all benefit recipients as if they were the original plan member.
But with the law, there are usually exceptions, as in these cases. For instance, plan member spouses can avoid immediate taxation by rolling their benefit share into their own retirement account. In the case of dependent children, the plan member is typically responsible for all taxes on their dependent’s benefits.
Plan now for a QDRO to be included
Most family law attorneys know to include QDROs in all their gray divorces. But people of all ages who divorce may need these special contracts drafted to ensure they receive all that they are due in their divorce.
