Arizona couples that have decided to end a marriage will have a multitude of concerns as the case moves forward. For couples who have retirement assets to worry about, it is important that the participants know everything they can about a Qualified Domestic Relations Order or QDRO. This is a tool in deciding how the couple will split the retirement assets.
In many cases, the spouses are under the impression that the agreement is fair, and they have received everything they are entitled to because of negotiation between the spouses and there was a court order. However, it is possible that there will be taxes, fees or money lost due to a lack of understanding about a QDRO.
A QDRO details how the assets in a retirement plan will be split. It can give property rights and pay support to a family member or dependent. Depending on the state in which the spouses live, the amount paid to each will vary. Arizona is a community property state with equitable division of marital assets and this must be kept in mind.
If, for example, the couple had a home, and it was completely paid off and one spouse also had a 401(k) retirement account, one spouse might allow the other to keep the property, while the spouse surrendering any rights to the house keeps a retirement account that he or she paid into. The court can agree to this. The spouse keeping the retirement account might appear to be getting the better end of the agreement before considering taxes and penalties that might be involved with the 401(k). Understanding the penalties and the long-term negatives that might accompany this kind of agreement can avoid making a mistake.
In some instances, it is wise to have help from a financial professional to decide on the best course of action to take with property obtained during the marriage, retirement assets and other frequently overlooked factors. Discussing all aspects of property division with a legal professional who is aggressive and experienced can be beneficial when considering options and the QDRO.
Source: Kiplinger.com, "QDRO: Critical Letters in a Divorce Case," Andrew McNair, March 22, 2017