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Visit us at www.DivorceAndYourMoney.com Divorce and Your Money is your guide to avoiding costly mistakes during divorce. Shawn Leamon, Certified Divorce Financial Analyst and MBA, wants to help you learn the fundamentals of how to get a divorce. Whether you are looking for an uncontested divorce, a do it yourself divorce, or an online divorce, resources are available to offer guidance. Through his divorce podcast and divorce blog, Shawn offers his professional opinion on the best ways to handle the end of your marriage. He covers topics including how to file for divorce, divorcing a narcissist, and finding the best divorce attorney. Even tricky subjects such as a “what is a QDRO?” and “is alimony taxable?” are tackled through these venues. If you need to know what the first steps are or what you should do to head to trial during litigation, you can find resources to give you a step-by-step guide to what comes next. Think of his advice as an alternative to divorce support groups where you can find exactly what you need when you need it. He offers one-on-one divorce coaching to give you a solid grasp on the decisions that are bound to affect your financial future. Before you have a divorce decree in hand, you will likely go through some type of divorce mediation. For any spouse saying, “I want a divorce,” you need to make sure that you are getting the financial future you are entitled to. Do not allow yourself to be blinded by the emotional, legal, and financial burden that divorce can become. Instead, take control of your situation with sage wisdom to help all individuals make better financial decisions for their independent future. If you find yourself asking “where are the best divorce lawyers near me?”, Shawn can help you to recognize the best of the best. Whether you need a divorce in Texas, a divorce in Florida, or a divorce in New York, you will have all the knowledge you need to find the best team of professionals to assist you. You can start from a place of being legally separated or once you have already started to file for divorce using free divorce papers or an attorney. No matter where you or your marriage may be in the process, Shawn Leamon has professional advice to offer your unique situation. A simple no fault divorce or a high-stakes power struggle are all areas he has vast experience with during his work outside of Divorce and Your Money. Let his advice be a guide to help you get all that you need for a secure financial future in your divorce records. It will not make a difference whether you are getting a divorce in Ohio or a divorce in California if you are following the basic principles set out through Divorce and Your Money’s divorce blog, divorce podcast, and divorce coaching.
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Apr 27, 2017

This was originally published on Divorce and Your Money here

What is a QDRO?

QDRO stands for Qualified Domestic Relations Order, which is a court-ordered document used to split certain types of retirement plans during divorce. You will need a QDRO if you are trying to divide a 401(k), 403(b), pension plan or other type of employer-sponsored retirement plans. The employee, or owner of the plan, is called the “participant,” while the non-employee spouse is called the “alternate payee.” The QDRO form tells the retirement plan sponsor how to divide the plan in the event of divorce. Without a QDRO, the alternate payee has no legal right to the funds in a retirement plan.

A QDRO Form Must Contain Certain Information

QDROS are complex, as every retirement plan has different rules and procedures. However, there are four key areas that every QDRO requires:

1) Name, Social Security Number and Current Address of the Participant (plan owner) and Alternate Payee (non-employee spouse)

2) Exact name of the plan that is being divided

3) How the benefits will be divided

At its core, the items seem straightforward, but there are a lot of nuances involved.

How much does a QDRO cost?

A QDRO costs around $400-$1,000 depending upon your state and which QDRO attorney you use to draft the plan. Also know that plan sponsors may charge a fee for dividing the QDRO, which can range from $300 to $1,200 to divide the plan. 

Common QDRO Mistakes

1) Not specifying plan names, types, and dates

Within settlement agreements, common mistakes are forgetting specifics and being too erroneous while drafting up the QDRO. Simply referring to a vague “retirement account” and an unspecified “lump sum” leaves too much room for interpretation: One spouse could argue that the sole intent of the QDRO was to split your 401K account—not your pension plan.

The order should also set a clear date that each account is to be divided. It is critical to be as clear as possible, so that neither party can argue the intention later.

2) Attempting to divide an indivisible plan

Specifying the plan type is also a crucial component of determining whether a plan can be divided. Too often, QDROs are drafted that attempt to divvy up a plan that is indivisible. Only plans that fall under the Employee Retirement Income Security Act (ERISA) of 1974 qualify, and not all retirement benefits are required to follow these guidelines.

Non-ERISA plan (e.g., supplemental and excess benefit plans) are not subject to division by a QDRO. Additionally, many of these “golden handcuff” plans do not include survivor benefits, and they terminate the moment the employee passes. To avoid future litigation, it is critical that you and your attorneys know the type of plan before settlement agreements take place.

3) Forgetting to address gains and losses

Defined contribution plans (e.g., a 401K) fluctuate with the market. As payouts for qualified plans can take upwards of 90 days from the date the agreement was signed, it is important to address whether gains and losses will affect the dispersed sum.

The gross dollar value of the plan is almost guaranteed to change. How much it changes depends on the amount invested. In the agreement, make sure to indicate whether the amount dispersed will reflect those gains and losses, or will remain stagnant after the date of signing.

4) Not considering tax implications during division

All plan types are not equal. When dividing assets and retirement accounts, understand the tax implications that come along with each of them. In the case of a pre-tax account (e.g., a 401K) the government will be entitled to its share when it is taken out during retirement. In contrast, an after-tax account (e.g., a Roth IRA) is not deducted upon withdrawal.

In other words, if a divorcing couple is agreeing to split a 401k and a Roth IRA that are equal amounts, then the spouse receiving the Roth IRA will gain more—since that money will not be taxed. To avoid being short-changed, make sure you understand the tax implications during the settlement.

5) Disregarding a loan balance

If a loan balance exists on a defined contribution plan, it must be addressed in the QDRO. Should the loan balance amount to more than the entitled payout, the account will show insufficient funds.

Perhaps a loan balance has been worked into the QDRO, but there are recurring repayments on it. If so, the document needs to define whether the payment sum will reflect the loan balance on the date of signing (or the date of division).

6) Failing to get a QDRO Pre-Approved

QDRO forms and retirement plans are complicated, and you can impair yourself in a situation where you have agreed to a legally impossible division of a retirement plan in your divorce decree - potentially causing months of delays and thousands of dollars in legal expenses to change after the fact. How do you prevent this from happening? Get your QDRO pre-approved before finalizing your divorce. By contacting the plan sponsor in advance, you can avoid costly delays in splitting a retirement plan.

Use a QDRO Attorney for Help

A QDRO attorney can help ensure that retirement plans are split properly and help you avoid mistakes. A QDRO form is highly specialized and requires deep technical knowledge beyond the purview of most divorce attorneys. You need the help of a specialist. Here are some of the companies that specialize in drafting a QDRO.

QDRO Solutions

http://www.qdrosolutions.net/

QDRO Solutions is based in Mt. Pleasant, South Carolina. It is one of the top firms in the United States for drafting QDROs, as their founder wrote The Complete QDRO Handbook: Dividing ERISA, Military, and Civil Service Pensions and Collecting Child Support from Employee Benefit Plans. You can learn more about QDRO Solutions in this interview here. [Insert Interview] 

QDRO Consultants

There are multiple firms that use the name QDRO Consultants.

QDRO Consultants Ohio

https://qdros.com

There is a QDRO Consultants firm based in Medina, Ohio. While the information about their team is not clear, members of the firm have authored two books: Dividing Pensions in Divorce and Value of Pensions in Divorce. The Ohio-based firm also has a website dedicated to attorneys at https://www.qdrodrafting.com/. At the moment, they offer a 7-12 business day turnaround time for QDRO forms.

QDRO Consultants Nevada

http://qdroconsultantsllc.com/

There is also a QDRO Consultants based in Reno, Nevada, owned by Melinda C. Cameron. The firm has a very clean website describing the drafting process and a QDRO costs $725. They also have packages for initial consultations. 

QDRO Express

QDRO Express, based in Taylor, Michigan, is owned by Robert Treat. According to the website, the firm specializes in QDROs in Michigan and Ohio, but also works nationally. Their QDRO fees start at $500 and increase from there.

Shawn Leamon, MBA, CDFA is the host of the “Divorce and Your Money Show” and Managing Partner of LaGrande Global, with offices in Dallas, New York and Hanover, New Hampshire.

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