Photo of Jeanne M. Frazee

The Experience To Protect Your Rights

Photo of Jeanne M. Frazee

The Experience To Protect Your Rights

What role does a QDRO serve in a Michigan divorce?

On Behalf of | Nov 17, 2023 | Marital Property Division |

Divorcing couples in Michigan often have a variety of financial issues to address. They may share real estate with their spouses that they either need to sell or refinance. They may need to close shared lines of credit and look into starting their own separate financial accounts. They may even need to divide the resources that they have set aside for their future comfort, including their retirement savings.

Many people preparing for divorce in Michigan worry about how the end of their marriage may affect their financial stability during retirement. A qualified domestic relations order (QDRO) is a very important document for those worried about preserving their retirement savings after a divorce.

What is a QDRO?

It is hard to infer from the name what exactly a QDRO actually does. It is essentially a special document that helps divide retirement accounts as part of the property division process in a divorce. A QDRO is not a court form. It is a special document divorcing couples create to bypass financial penalties for withdrawing funds from a retirement account.

One of the lawyers involved in the divorce can draft the QDRO. They will then submit the document to the courts for approval. The terms it outlines need to mirror what the courts approved in the property division order. After court review, the spouses will need to present it to the business or financial professional managing the retirement account.

That professional will then follow the instructions in the QDRO to move a specific percentage of the account’s balance into a separate account in the name of the other spouse. People who don’t fulfill all of these steps may not be able to successfully divide the account and could risk losing a portion of its value due to market fluctuations or misconduct by the spouse who holds the account.

When properly drafted and executed, a QDRO eliminates the taxes and penalties that people usually need to pay for making an early withdrawal from a retirement savings account like a Roth IRA or a 401(k). Some couples are able to negotiate a way to split retirement savings without actually dividing the account. Many others will need a QDRO if they want to preserve as much of their retirement savings as possible.

Making use of the right tools can help protect the financial stability of those divorcing in Michigan. Seeking legal guidance can help each individual who is pursuing divorce to make the most of the legal resources available to them in this regard.