Photo of Jeanne M. Frazee

The Experience To Protect Your Rights

Photo of Jeanne M. Frazee

The Experience To Protect Your Rights

What is a QDRO in divorce and how does it work?

On Behalf of | Dec 2, 2021 | Divorce |

Many couples getting a divorce in Michigan will have to worry about retirement benefits. A QDRO may be necessary during the divorce, so it’s important to know what this is and how it works.

What is a QDRO?

A qualified domestic relations order, or QDRO, from the court during a divorce requires part of one spouse’s retirement plan to be paid to their spouse. Although assets are divided during a divorce, retirement plans are usually not included, which is what makes a QDRO necessary. When a QDRO is involved, it’s usually issued by the court as a way to help the spouse pay certain obligations toward the marriage or family.

How does a QDRO work in divorce?

When there is a court-ordered QDRO, it’s used to divide retirement plans. Portions of the retirement plan can be used toward marital property, alimony, child support and other types of support toward a former spouse or dependent who is included as a participant in the retirement plan.

QDROs are required to comply with the Employment Retirement Income Security Act, or ERISA, and Michigan state laws. The alternate payee receives a portion of the retirement benefits that the individual earned through their retirement plan. The alternate payee might be a spouse, former spouse or child who is a dependent of the person.

What are the benefits of a QDRO?

A QDRO offers certain benefits during a divorce. It can make the transfer of assets easier and eliminate issues between spouses. The QDRO can help the former spouse build a nice nest egg in spite of the divorce.

The spouse who makes the payout can benefit from no early withdrawal penalties being instituted when transferring money to their ex. The receiving spouse doesn’t have to worry about taxes, either.

If you are getting a divorce, a QDRO can make your life easier. It helps make sure you receive funds from your ex’s retirement benefits.