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Marital Property Division

What is a QDRO?

Both for high earners and others in the Los Angeles area, one of the most valuable assets a couple may share is their retirement plans. Whether a pension, a 401(k), or some other plan, these accounts often are worth tens of thousands of dollars since couples use them to stash away money for their retirement.

Not surprisingly, retirement plans will in many cases be considered community property subject to a property division under California's laws should a couple decide to divorce or legally separate.

Not only is this the law, but it also is arguably a matter of fundamental fairness since both parties should have the benefit of their family's retirement savings.

Particularly if the couple is able to agree on property division, getting the retirement plan divided could well be the easy part of the process. Retirement plans have important tax implications, which means that one party who was not an employee under the terms of the plan has to follow special steps in order to be allowed to access the plan without tax consequences.

Specifically, the person wanting to access the retirement plan must submit a qualified domestic relations order, or QDRO, signed by the judge, to the retirement plan's administrator. If the administrator determines the plan can be accepted under the plan's rules and under federal law, then the administrator will adjust the plan to conform to the QDRO.

Drafting a QDRO correctly takes experience and attention to detail, as the rules governing how to do so can vary widely even from company to company. Moreover, the stakes of not doing so are high. At a minimum, poor or incomplete drafting can mean delays and additional costs. In the worst case scenario, it could even spell adverse tax consequences or unfair division of property.

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