2 mistakes people often make concerning QDROs during divorce

On Behalf of | Jun 12, 2023 | Divorce |

Those who need to share retirement savings when they divide their property in a divorce can do so without penalty in most cases. A qualified domestic relations order (QDRO) can lead to the creation of a second account that contains a portion of the original account’s balance.

The process of transferring the funds from one account to another in accordance with a QDRO will typically not trigger taxes and penalties the way that an early withdrawal from the account to cover personal expenses might. Anytime couples hope to divide a retirement savings account after a divorce, a QDRO may be necessary. Those who utilize a QDRO during property division proceedings will want to take care that they don’t make common mistakes that far too many divorcing couples do.

Assuming the creation of a QDRO is automatic

It is quite common for those in the end stages of a divorce to be very burned out with the legal process. They might therefore completely overlook the importance of drafting a QDRO after a judge reviews and approves a settlement agreement or enters a property division order. The courts do not put together a QDRO, which means that the divorcing spouses must do so themselves. People sometimes fail to draft a QDRO in a timely manner and then submit it to the courts for approval.

Failing to record the QDRO

Having a lawyer put together the QDRO and presenting it to the courts for approval is only the first step in the process of dividing retirement accounts. It is also necessary to present the paperwork to the professional or business managing the retirement account. The longer someone waits to record a QDRO, the more likely it is for there to be changes in the value of certain investments or for the other spouse to make a sizable withdrawal that will affect what the other receives. Although it does mean one more detail to manage, it is important to follow through with agreements related to retirement savings in a divorce people otherwise risk losing what could be a sizable portion of their share of marital assets.

Learning about and avoiding common property division mistakes may help those who are preparing for divorce to avoid potentially expensive oversights.