Qualified Domestic Relations Order

By: Martin M. Shenkman, CPA, MBA, JD

A Qualified Domestic Relations Order (QDRO) is a mechanism to divide a retirement account between spouses in a divorce without triggering income tax to you on the payment of retirement benefits. Without these rules if you gave your spouse an interest in a pension plan as a part of your divorce that transfer could trigger negative tax consequences. QDROs, are critical to resolving many divorces in that this mechanism enables a divorcing couple to divide up a pension plan. Without a QDRO retirement plan assets would not be divisible. Without a QDRO the plan participant would have to report the distributions to the ex-spouse in income. Instead, a QDRO results in the ex-spouse who is receiving the participant's spouse's distributions reporting the income. A QDRO is an order, judgment, or decree, that acknowledges or creates the existence of right for someone other than the participant/ex-spouse to receive some or all of the participant's qualified plan benefits. It is made pursuant to state domestic relations law. It relates to providing child support, alimony, or marital property rights of a spouse, former spouse, child, or other dependent of a plan participant.

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