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Who needs a Qualified Domestic Relations Order?

If you are divorcing your spouse, one term that you might encounter is Qualified Domestic Relations Order. Known as QDROs, these are decrees, orders or judgments for retirement plans to pay spousal or child support, or convey marital property rights to another person.

To be valid, a QDRO has to contain very specific details, including:

-- Names of the plan participant and every alternate payee, along with their mailing address

-- The percentage or amount of benefits to be paid from the participant's plan to the alternate payee(s)

There are restrictions on QDROs as well, as none may award benefits or amounts that are unavailable under the provisions of the participant's plan.

When QDRO distributions are paid to minors or other dependents, the plan participant is the one with the tax liability. There are also ways to rollover all or portions of distributions from QDROs to make them tax-free.

Your family law attorney is a good source to bring you up to speed on all that you need to know about Qualified Domestic Relations Orders. Make sure that you investigate these possible sources of income during divorce negotiations, as a regular divorce judgment will not be sufficient for you to receive any funds or distributions from the pension plan of your soon-to-be ex-spouse.

Some divorcing spouses in Salem who both have pensions will agree to waive the right to each other's benefits. In other circumstances, such as when one spouse wants to retain the marital home, he or she will agree to waive any future rights to one's spouse's retirement benefits in lieu of being granted ownership of the home.

Source: Internal Revenue Service, "Retirement Topics - QDRO - Qualified Domestic Relations Order," accessed April 22, 2016

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