QDROs and DROs

In order to transfer any portion of your spouse’s retirement, pension or like plan in your divorce action, special orders must be drafted and signed by the court for each account. Transfer and division of these accounts should happen immediately upon finalization of your divorce. Ideally, you want the special orders for transfers signed at the same time as the judgment of divorce. Upon signature by the court, these distribution orders must be accepted by and filed with the entity that administrates the plan or account. Then and only then is your share of the account yours.

Just as there are different types of accounts, there are different types of orders to divide or change ownership of pensions, retirements and like accounts in divorce actions. The most common type of Order is a Qualified Domestic Relations Order (QDRO - pronounced Quadro), is used to divide qualified plans only. The transfers of ownership of accounts or portions of accounts by QDRO or DRO are not taxable events. Non-qualified plans or accounts include, but are not limited to, IRA’s, deferred annuities, any type of government or military pensions or deferred compensation. Domestic Relations Orders (DRO’s) are often used for non-qualified plans or accounts. Whatever type of plan you need to divide, a court order needs to be signed to effectuate the division.

It is not uncommon for retainer agreements in your divorce action to exempt the preparation of QDRO’, DRO’s and other types of orders and documents that divide marital property. This does not mean that it does not have to be done or that your attorney is not happy to do it for you. It only means that it is a separate item that you need to address as separate from the divorce action itself, much like preparing a deed and other required papers to transfer real property would be a transaction separate from the divorce action.

The moment you are divorced, you lose all rights as spouse to any account in your ex-spouse’s name. Your spouse can do anything they wish with those accounts the moment you are divorced which is a risk you should not take. Accidents happen, too. Should your ex-spouse die before the orders are signed and filed with the account administrator transferring your entitlement to you, you have lost those accounts. They will pass, including your portion of the account, pursuant to beneficiaries on the plans or through the estate; however the plans and accounts were set up. You lose all of it, which is why, if you are divorced and these orders have not been prepared, signed by the court, provided and accepted by the plan or account administrator effectuating the transfer to you of your share, you must take immediate action to protect your interests.

If you need to discuss the preparation of QDRO’s or other orders to transfer accounts and assets awarded to you in a divorce action, call the Law Offices of Peter Van Aulen for a free initial consultation at 201-845-7400.