Having a robust retirement plan or pension can provide critical security for the future. However, if you get divorced, the split can leave you feeling incredibly vulnerable concerning your post-divorce and retirement financial status.
If you have a retirement account or pension and are going through a divorce, you should know what a qualified domestic relations order (QDRO) is and why it may be critical to dividing these assets.
What is a QDRO?
In Texas, a Qualified Domestic Relations Order (“QDRO”) is a document that recognizes that a spouse, former spouse, child, or other dependent is entitled to receive all or a portion of the benefits payable to a participant under a retirement plan. The amount or percentage will be outlined in the divorce decree. The person who will be receiving the funds is the “alternate payee.” It is one thing to have the right to all or a portion of the assets or benefits of a retirement plan. It is entirely another to actually be able to get those funds distributed to a person who is an alternate payee. Just like it is one thing to have a money judgment against another. Having the piece of paper from the Court give someone a legal right – but that right then has to be enforced. A QDRO is the vehicle that is used to enforce the right to receive all or a portion of the benefits and actually have those benefits or assets distributed. Or to use another metaphor, a divorce decree is like a driver’s license, giving one certain rights and privileges but, one must still have a car to be able to actually drive. The decree is like the license and the QDRO is like the car.
Dividing pensions and retirement contributions
Backing up, we should explain that in Texas, retirement accounts like a 401(k) are separate property if parties have them before marriage. However, any contributions made to these accounts during the marriage are typically considered community property.
As such, in a divorce, retirement accounts are often eligible for division per state property division laws.
Because it can be very costly to withdraw money from a retirement account early, you can secure a QDRO from a state court or agency to protect each person’s share of the account until the time comes to cash out.
How a QDRO works
A QDRO assigns an alternate payee for a retirement account. In a divorce, this payee would be the non-contributing spouse. This alternative payee will receive a specific portion of the payout from the plan administrator. Understand that when calculating the percent or amount of the money that will go to an ex, it will only include the contributions made during the marriage.
Depending on the order, plan administrators may release funds to the alternate payee right away, roll them into another account or distribute them when the owning party retires (or is eligible to retire)
What if the Court did not give me an order to distribute my ex-spouse’s retirement funds to me?
The lawyers at Skillern Firm Divorce & Child Custody Lawyers have been presented with this issue many times. There are times when the Court may not actually give an order to distribute an ex-spouse’s retirement funds, the division of which was outlined in the decree. We see this often where people represent themselves in the divorce process or use forms promulgated by a pro bono or volunteer agency. It is important to first understand the mechanism that is to be used to actually obtain the distribution of retirement funds that the Court awarded in the divorce decree – a Qualified Domestic Relations Order or QDRO.
The divorce decree entitles me to a percentage of my former spouse’s retirement plan assets, now what?
Often, a divorce decree will entitle one or both spouses to receive a portion of the other spouse’s retirement plan benefits/assets that were accumulated during the marriage. However, simply having the language of the decree is not enough. In order to actually get the retirement plan to distribute the funds to which one is entitled under the terms of the decree, one must have the Court sign a Qualified Domestic Relations Order or QDRO. The QDRO is then presented to the administrator of the former spouse’s retirement plan to actually effectuate the distribution of the funds that the person is entitled to receive under the terms of the divorce decree.
I have a divorce decree, but the Court did not give me a QDRO. How do I get one?
There is a procedure in Texas to obtain a QDRO after a divorce decree has been rendered. This is done by filing a petition with the Court to enter a post-divorce Qualified Domestic Relations Order. It is filed as a “petition” which is a new lawsuit requesting that the Court enter an order for a QDRO. The person seeking the entry of the QDRO must inform the Court that the alternate payee is entitled to receive retirement benefits per the decree and that no QDRO effectuating the division of the property, as set out in the decree, was signed. In Texas, the Court can also grant attorney’s fees to the person filing the petition[i].
Important considerations
A QDRO may not be necessary in all cases. For instance, if both spouses have individual retirement accounts that are roughly equal, there may be no reason to divide either plan.
Parties could also work out an arrangement where the party that would receive a portion of the account instead receives property of equal value. In other words, instead of receiving $50,000 in a retirement plan, a person might keep a boat.
Keep in mind that numerous details will dictate whether a retirement account or pension is eligible for division, how it will be divided and what parties can do to streamline the process. Thus, having legal guidance can be critical.
Obtaining a post-divorce qualified domestic relations order can be a technical process and should not be attempted on your own. If you would like to speak to someone about your particular situation, call our office at (832) 688-6606 and speak to one of our experienced Family Lawyers. We are here to help you as we have helped many others.
* At Skillern Firm Divorce & Child Custody Lawyers, we pride ourselves on the results we have achieved for those we help. We stand ready to assist you with any of your Family Law needs. Contact us today. https://skillernfirm.com/
[i] Tex. Fam. Code §9.106
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