What role does a QDRO play in a divorce?

On Behalf of | Oct 8, 2020 | Property Division

Dividing property is often a source of contention in a divorce because both spouses have their own ideas about what is fair. The courts often need to find a way to reasonably split up the property between former spouses in compliance with Texas law. 

If you or your spouse have a pension or a retirement account, getting a fair share of that valuable asset is often a major concern in divorce proceedings. You may have expected to rely on that account for the rest of your life and never start to save on your own behalf for retirement. 

What does a Qualified Domestic Relations Order (QDRO) have to do with the division of a pension or retirement account in a divorce?

A QDRO is basically a court order to split the account

If your retirement savings are in a tax-deferred account, you could incur substantial financial penalties if you attempt to cash out all or some of the balance before you reach retirement age. Some people worry specifically about whether a divorce will diminish their retirement savings twice by first forcing them to divide the account and then penalizing them for doing so. 

Provided that you submit and properly execute a QDRO after a divorce, you likely won’t have to worry about financial penalties. However, if either spouse takes a withdrawal from the account in their name after the divorce, penalties could still apply. A QDRO can also help with pensions by making the distribution to the other spouse automatic instead of reliant on the compliance of the spouse whose name was originally on the pension account. 

Provided that you split the account as ordered in the QDRO and save the resulting funds for retirement as initially planned, a QDRO can be an invaluable tool for protecting the assets you count on for retirement. Talk to an experienced advocate to learn more.