What is a QDRO and How Does it Work? 

 Posted on January 23, 2025 in Divorce

Getting divorced is almost always a major financial stressor, but this is especially true when the person getting divorced is over 50 and approaching retirement age. The financial implications of divorce at this age can be especially pressing because there may not be much time to contribute to savings, investments, and other sources of retirement income.

If you are considering divorce and either you or your spouse has investment accounts that are marital property, Qualified Domestic Relations Orders will probably be an important part of your divorce. Whatever challenges your finances present during divorce, our Illinois divorce attorney is here to help.

What is a QDRO?

A Qualified Domestic Relations Order (QDRO) is a legal document that directs a retirement plan administrator to divide a retirement account between the account holder (the plan participant) and their former spouse (the alternate payee) as part of a divorce settlement. QDROs are required for certain types of retirement accounts governed by federal law, such as 401(k) plans, pension plans, and other employer-sponsored plans.

QDROs are important because they ensure that the alternate payee can receive their share of the retirement funds without triggering penalties or taxes for early withdrawal. Without a QDRO, it may be impossible to divide the retirement account correctly, even if the divorce settlement requires it.

How Does a QDRO Work?

A QDRO specifies how the retirement account will be divided between the parties. This involves several steps:

• The QDRO must be carefully drafted to comply with both the terms of the divorce settlement and the specific requirements of the retirement plan.

• Once drafted, the QDRO is submitted to the Court for approval.

• After the Judge signs the order, it must be sent to the retirement plan administrator, who reviews it to ensure compliance with the plan’s rules.

• Upon approval by the plan administrator, the funds are divided as directed by the QDRO. The alternate payee can typically choose to roll over their share into another retirement account, receive periodic payments, or leave the funds in the original account until retirement age.

When is a QDRO Used?

A QDRO is typically used when retirement accounts, such as a 401(k) or pension, are considered marital property and are subject to division during a divorce. In Illinois, only the portion of the account that was earned during the marriage is considered marital property. The portion earned before the marriage remains the individual property of the account holder. However, accurately determining the marital and non-marital portions of a retirement account can be a complex process that often requires legal expertise.

Do You Need an Attorney for a QDRO?

QDROs are highly technical and involve both state and federal laws as well as the rules of each specific retirement plan. Errors in drafting or submitting a QDRO can have serious financial consequences, including loss of retirement funds or unexpected tax liabilities.

A skilled divorce lawyer will ensure the QDRO is correctly prepared, approved by the Court, and accepted by the plan administrator. They can also help protect your financial future by ensuring your retirement accounts are divided fairly and in accordance with Illinois law.

Call a Rolling Meadows, IL Divorce Attorney 

If you are over 50 and facing divorce, it is especially important to protect your retirement and investments. Contact the Hoffman Estates, IL divorce lawyer at The Law Office of Nicholas W. Richardson, P.C. to discuss your case and learn more about how QDROs can be used as part of your divorce settlement. Call 847.873.6741 today to schedule a complimentary consultation and get the guidance you need in every area of your divorce.