For many Sugar Land residents, working provides a way to save money for later in life. Couples often build retirement accounts they intend to spend together in their golden years. However, when those plans do not come to fruition due to marital problems, those accounts will probably get divided. In order for one spouse to be entitled to funds from the other party’s retirement account and to avoid incurring any tax ramifications, the parties will need a qualified domestic relations order.
A QDRO is an order that must be put together and executed in a particular manner in order to work properly. The order relates to spousal support, child support or rights to other marital assets to which a child, spouse, ex-spouse or other dependent would be entitled to in the divorce. It must be in the form of a court order and comply with ERISA and Texas domestic relations laws.
In order to be valid, the recipient must be one of the above individuals. The QDRO entitles the recipient to avoid the 10% tax penalty ordinarily assessed for withdrawals from a qualified retirement account. It must also contain specific information in order to be considered valid. It would be advisable to check with the plan’s administrator to determine whether they require any additional information or have a form that must be used.
Dividing retirement accounts in a divorce happens often, but Sugar Land residents should avoid making the mistake of thinking that the wording in a divorce decree or settlement is enough. Failing to have a QDRO could result in problems that could end up costing both parties. In order to increase the chances that everything is done correctly, it would be a good idea to consult with a family law attorney before moving forward.