A Full-Service Law Firm
Located in Quincy, Massachusetts, Levin and Levin, LLP was established in 1933 as a full-service law firm committed to providing clients throughout the South Shore with the highest level of legal representation available.

What is the purpose of a QDRO during a divorce?

On Behalf of | Jan 15, 2025 | Divorce

Trying to navigate the family law system can feel like learning an entirely new language. People preparing for divorce have often never had to go to court before and know very little about the process ahead.

Particularly when they have remained married for years and have extensive marital estates, they may not know what to expect. Many of the terms thrown around can feel confusing and overwhelming. For example, people may feel confused about the difference between equitable distribution and community property rules.

They may also feel confused about the tactics their lawyers might suggest for preserving their resources during and after a divorce. Lawyers helping people with complex marital estates might advise them that they are likely to require a qualified domestic relations order (QDRO) to complete the property division process without risking additional financial setbacks. What is the purpose of a QDRO drafted as part of a divorce?

A QDRO is an asset division tool

The name doesn’t provide much insight into the purpose of a QDRO. It is a commonly used and beneficial legal document employed for dividing financial assets. After the courts issue a property division order at the end of a divorce, the spouses must act to divide their marital property and shared financial obligations.

A QDRO is a document drafted by one of the lawyers involved in a divorce to authorize the penalty-free division of a retirement account or pension. The information included in a QDRO must match the terms established in the property division decree approved by the courts.

Both spouses have to review and approve the QDRO before its submission to the party that manages the retirement account or pension. The QDRO provides instructions to split the original account by withdrawing a percentage of the balance and depositing it into a newly-made account in the name of the other spouse.

The proper execution of a QDRO allows those splitting retirement resources in a divorce to avoid the 10% penalty imposed on early withdrawals. The QDRO can also eliminate the income tax consequences of making a retirement account withdrawal.

Those who decide that splitting accounts or pensions is the most effective solution in a property division scenario and those ordered to split an account by a judge benefit from using a QDRO because it allows them to retain as much as possible of the account while sidestepping increased tax obligations.

Learning more about the different tools used during a divorce can help people more effectively navigate the family law system. Those who have to divide a retirement account or pension during divorce may benefit from the creation of a QDRO.

FindLaw Network