Dec 5, 2018 | Family Law

When discussing divorce or family law, a Rockford, Illinois, resident may hear the acronym QDRO mentioned. The phrase stands for qualified domestic relations order, which is a document that can be very important not only in high asset divorces, but also in family law matters where spouses are of much more limited means.

The reason a QDRO is important is that it pertains to the division of retirement plans, like a 401(k). People from all walks of life contribute to their retirement plans, and it is no surprise that for many couples, a retirement plan falls among their most valuable assets.

Like any other marital property, a retirement plan can be subject to an equitable division between the spouses. An example would be when a couple has been married for a long time, and the savings in the retirement plan were built up over the course of the marriage.

Actually dividing a retirement plan, however, is a little tricky. For one, the administrator of the retirement plan is not a party to a divorce or legal separation and thus, is not automatically bound by a divorce decree or other final order. Moreover, retirement plans are governed by a number of federal laws, including laws that confer on these plans their favorable tax status.

This is where a QDRO comes in to play. Although the details of what should be in a QDRO vary, they are basically orders that an attorney will draft and the judge will sign. If the administrator of the plan accepts the order upon receiving it, then, despite other rules that may appear to the contrary, the retirement plan in question can be divided as described in the order. Usually, this can be done without negative tax consequences.

Even when all sides are in agreement, it is critically important that one’s family law attorney draft the QDRO correctly. Failing to do so could, at best, mean a slower process and, at worst, some negative financial consequences.