Although some people will choose to get a divorce without the aid of a divorce attorney, it can sometimes be easier to work with lawyers for at least certain aspects of the case. Splitting property, particularly retirement benefits, can be difficult because it requires that certain steps are taken. You will typically need to have a Qualified Domestic Relations Order. However, since there’s so much at stake, mistakes with QDROs are common and can cost you a lot if they aren’t avoided.
The QDRO is a technical order that provides a set of instructions for retirement plan administrators, letting them know how retirement benefits need to be split. It lets them know what benefits need to be paid to the alternate payee, who is typically the former spouse. The QRDO is generally used when dividing retirement assets. However, there are cases where it could be used when collecting support payments, such as spousal support or child support.
Common Mistakes Made with QDROs
Although they might seem simple on the surface, QDROs have the potential to be quite complex. This is especially true when trying to determine exactly how much of a retirement plan a former spouse should be able to receive, even though the plan is in their ex’s name. A lot of work goes into understanding and drafting the QDRO, and it’s not the sort of thing that someone should attempt without an attorney.
However, whether there is an attorney that specializes in QDROs on the case or not, there are certain types of mistakes that sometimes occur. It’s important to have an understanding of these types of issues to help ensure they don’t happen to you.
Not Completing a QDRO
Most people do not know about QDROs at all. They’ve never heard of them, and their divorce attorney may have never even brought them up for whatever reason. This means that there are cases where the QDRO never gets completed. Sometimes, the attorneys in the case might both mistakenly believe that the other is taking care of the QDRO.
If the paperwork is not completed, it typically means that the retirement benefits can’t be fully sorted out. The spouse who is supposed to receive the benefits from their ex’s retirement accounts won’t be able to get them until the QDRO has been finished. This can drag on for a long time.
Not Knowing the Type of Plan Being Divided
There are many different types of retirement plans in use today, and you need to be aware of what’s being divided. Know the type of plan and how it can be divided. Is it a defined contribution plan or a defined benefit plan? Is it going to be given as a lump sum now, or a lump sum later? It is a stream of income instead? When does it start and when will it end if you are getting payments?
Always make sure the correct name of the plan is being used on all of the paperwork. Any mistakes with QDROs, even small ones, could be misconstrued that will lead to problems and confusion later. Everything should be as clear as possible.
If all of this sounds confusing that’s because it is. The more complex the retirement plans are, the more difficult it will be to complete the QDRO. It’s not the sort of thing you want to attempt on your own. It’s always better to get some help from professionals to ensure you are doing it right.
Not Being Clear in the Divorce Agreement
In the best circumstances, the divorce agreement will make it clear who is responsible for creating and submitting the QDRO. One of the other things that needs to be determined at the start will be who is responsible for paying the fees involved with the QDRO. The costs vary but could be in the thousands of dollars in some cases. Either of the spouses can pay, or they could be split between the parties. This helps to reduce the amount that any one person will have to pay.
One of the other things regarding the QDRO that should be included in the divorce agreement is when the QDRO process should begin. There should be a clear date of division. There are many cases where this isn’t completed for several years after the divorce. Naturally, this can lead to issues. It’s better to have it all taken care of as soon as possible.
Otherwise, there could be issues with calculating earnings and losses because so much time has passed. In other cases, people might invest their funds from their 401(k) unwisely, which means they lose a lot of money. By the time their spouse gets the QDRO taken care of, they are getting a lot less in benefits than they would have if they had done it earlier.
Not Working with a Qualified Attorney
One of the other mistakes that some people make when they are splitting retirement plans is not working with an attorney versed in this field. While some divorce attorneys can provide help with QDROs, not all of them can. They will often suggest attorneys they know who can help. It’s always important to use an attorney to ensure that you don’t make mistakes with QDROs at any step of the way.
These are more complicated than many people realize, and it’s not as simple as trying to split things in half equally. Retirement plans often have a lot of moving parts, and there are many different types of plans that will have different rules associated with them.
What Should You Look for in an Attorney?
When you are choosing an attorney to help with the QDRO, check to see what type of experience they have. How long have they been working in this field? You want to choose those who have experience working on cases like yours. Don’t make the mistake of trying to do it all on your own. Even though there are some elements of your divorce that you can handle by yourself, others are better left to the professionals.