Retirement Planning in a Montana DivorceMarybeth Sampsel
For many couples divorcing in the Kalispell area, retirement accounts are the largest or the only major asset available for distribution. During property settlement negotiations, some clients end up being awarded a portion of their spouse’s 401(k) or pension plan. However, without taking the necessary legal steps, an ex-spouse’s employer could still pay out the benefits to the ex-spouse, leaving the other with little or nothing.
A Qualified Domestic Relations Order, commonly called a “QDRO” (pronounced “quadrow”), can often be used to protect your interest in a pension plan or retirement account. A QDRO is a domestic relations order that creates and/or recognizes the existence of an alternate payee’s right to recieve a portion or all of the benefits payabel under a qualified retirement plan. A QDRO essentially instructs your spouse’s pension plan how to pay the retirmenet benefits and to whom.
QDROs only apply to plans covered by the Employee Reitremen Income Security Act (ERISA) and that are IRS tax-qualified. Some examples of those note covered by ERISA include government pensions, miliratry pensions and most deffered compensation plans.
Domestic Relations Orders do not become “qualified” until they have been approved by a retirement plan’s Plan Administrator and the court. Many retirement plans have standard QDRO forms; however, I encourage anyone who may be entitled to a portion of a retirement account to meet with an attorney show has QDRO experience to ensure that all the related issues are addressed.