Virginia Divorce Law: Understanding Qualified Domestic Relations Orders

If you are getting a divorce and you have retirement accounts, you need to know about Qualified Domestic Relations Orders (“QDROs”). These documents are important because your retirement company may require these documents in order to divide your retirement accounts. Not all retirement accounts are covered, so it is important that you understand the basics. If you fail to handle the QDRO correctly, it can result in thousands of dollars of damages for your mistake.

So what is a QDRO, and why do you absolutely, positively need a lawyer for one?

What is a QDRO?

A QDRO is a document required by federal law to divide a retirement account. It is an additional piece of paper that is filed with the divorce court and signed by the judge. The document authorizes your plan administrator, the person responsible for your retirement account, to distribute funds.

What Types of Retirement Accounts Require a QDRO?

There are only certain types of “qualified plans” that require a QDRO. Other types of plans, such as government pensions, may require other types of documents such as an ADRO. A QDRO is specifically designed to address The most common types of plans that require a QDRO are 403(b) and 401(k) plans. IRAs are typically not divided through a QDRO. Government pensions are also not often divided by QDRO.

What Is The Process For Preparing a QDRO?

A QDRO is a highly technical document. It is a document that is relied upon by accountants to tell them exactly how to calculate your share of your spouse’s retirement accounts. As such, there are several specific provisions in the QDRO that may be unique to individual plans. A lawyer will typically obtain the template QDRO from your plan administrator and make substantial changes based upon what is ordered by the court or agreed by the parties for division of the retirement accounts. The template often does not cover exactly what you need.

Why You Absolutely, Positively Need a QDRO Lawyer.

There are a lot of pitfalls in preparing a QDRO. There are complicated concepts such as gains, loses, market performance, loan accounting, and valuation dates that can trip even lawyers up. If you are not careful about which options you select in a QDRO, it can snowball into a massive accounting mistake. Even checking one simple box wrong could lead you to be responsible for a massive deficit or even a large tax bill.

That is why it is important to do a QDRO right the first time. Under no circumstances should you ever attempt to handle a QDRO alone. Even when it comes to lawyers, you need to make sure your lawyer has handled QDROs before. Many divorce lawyers refer QDROs out because of how complex and dangerous they can be. If you have retirement accounts and are getting divorced, talk to a qualified lawyer.