During a divorce in Michigan, it is necessary to divide shared property fairly between you and your ex-spouse. Some assets may be easier to divide than others. For example, with a shared checking or standard savings account, it may be a simple matter of closing the account and dividing the money equally, but the same does not hold true for a retirement account because tax penalties can arise from early withdrawal. Division of retirement savings accounts often requires the court to issue a qualified domestic relations order.
To understand what a QDRO is, it is helpful to first understand what a domestic relations order means. According to the U.S. Department of Labor, a domestic relations order is a decree, order or judgment made to provide benefits to a child, dependent, spouse or former spouse in the form of marital property rights, child support or alimony. A state agency with the authority to make such decisions, usually a state court, issues such an order pursuant to applicable domestic relations law for the jurisdiction.
A domestic relations order requires the involvement of a court or other state agency; your property settlement does not automatically become a domestic relations order just because you and your ex-spouse both agree to it and sign to it.
A qualified domestic relations order is one that applies specifically to retirement savings accounts. Where the right of an alternate payee to receive benefits under the plan already exists, a QDRO formally recognizes it. Where it does not exist, a QDRO creates the right of an alternate payee to receive benefits payable under the plan.
There are limitations as to who can become an alternate payee with a QDRO. Only the child, dependent, spouse or former spouse of a plan participant can qualify. A valid QDRO must contain further information regarding the plan and the payees, including the amount each payee is to receive, the duration of payments and the contact information for each payee.
The information in this article is not intended as legal advice but provided for educational purposes only.