When you and your spouse decide to divorce, it’s important to understand how your assets will be divided. Unfortunately, this process isn’t as simple as splitting everything down the middle and sending each spouse on their way. In fact, one of the most complicated assets to divide is retirement accounts. To divide a retirement account, a Qualified Domestic Relations Order (QDRO) must be drafted with the help of St. Louis property division lawyers. The following blog explores the complicated nature of QDROs in further detail.

What Is the Purpose of a Qualified Domestic Relations Order?

When a couple files for divorce, all of their joint property is subject to division under Missouri’s equitable distribution laws. This means that property will be divided fairly as opposed to evenly, though the courts may split assets evenly if they determine that is fair.

One asset that is particularly complicated to divide in a divorce is a retirement account. This is because withdrawing funds from the account before retirement age can result in astronomical fees and tax implications. As such, if a retirement account is divided, a Qualified Domestic Relations Order must be drafted.

A QDRO allows for the withdrawal of funds from a 401(k) without the penalties that would typically accompany an early withdrawal. As such, the spouse receiving the funds from the account will not be taxed on the transfer, so long as they are placed in a retirement account. If they are put in any other kind of account, the recipient spouse will incur a 10% tax on the funds they received from the retirement account as per the divorce agreement.

It’s important to understand that only retirement accounts protected under the Employee Retirement Income Security Act are subject to division via a QDRO. If you have an IRA, it will be treated like any other marital asset.

What Must Be Included in a QDRO?

When establishing a QDRO, certain information must be included for the document to be legally valid. This includes:

  • The name of the retirement account owner and alternate payee (the spouse)
  • The last known mailing address of both spouses
  • The dollar amount or percentage of funds that will be allotted to the payee
  • The number of payments they will receive or a timeframe in which they can expect the funds

You should note that your QDRO may contain additional information specific to your circumstances, like how the QDRO should be handled in the event either party passes away or something should happen to the funds in the account.

Getting a divorce can be an incredibly confusing and emotional time, which is why it’s imperative to connect with an experienced attorney if you are going through this process. At the Stobie Family Law Group, our team understands the complexities of divorce and will do everything in our power to make this process as simple as possible for you. When you need help with a QDRO, we are here. Contact us today to learn more.