When it comes to high asset divorces, property division can be one of the most complicated and contentious matters. To ensure a fair split of assets, many couples turn to Qualified Domestic Relations Orders (QDROs). These orders help divide complex assets.
Here is a broad overview of how QDROs function in a high asset divorce.
What is a QDRO (Qualified Domestic Relations Order)?
A QDRO, or Qualified Domestic Relations Order, is a legal tool used to divide retirement plans during a divorce. This allows one spouse to receive a portion of the other spouse's retirement savings without incurring early withdrawal penalties or tax consequences.
These orders can help you divide assets such as:
- Stock options
- Pension plans
QDROs are helpful in a state like Nevada, where spouses are often forced to split their marital assets 50/50.
Creating a QDRO can be complex, so you should work with an attorney experienced in dividing retirement assets. Ford & Friedman is skilled in this area, so consider allowing us to help.
The order must meet specific requirements, including outlining the percentage or dollar amount awarded and the timing of the distribution. Essentially, it instructs the plan administrator to disburse a portion of the account to a former spouse. By using a QDRO, divorcing couples can ensure that retirement assets are divided fairly and without financial hardship.
The Pros and Cons of Using a QDRO for Asset Division
One benefit of using a QDRO is that it allows for a more equitable division of assets. Retirement accounts can often be a significant source of wealth in a marriage. Dividing it equally, 50/50 is not always the best or fairest solution.
However, creating a QDRO is often a complicated, lengthy process. The spouse without a retirement account may have to wait years before receiving their portion of the funds.
Common Mistakes to Avoid When Creating a QDRO
- Avoiding legal advice
Without proper legal guidance, you run the risk of leaving money on the table or unwittingly signing away your rights.
- Accidentally missing required steps
You must stay vigilant when creating your QDRO. It’s easy to skip steps like filing the QDRO with the court, serving it to the plan administrator, and obtaining the required approvals.
- Being unfamiliar with the intricacies of your retirement plan
Familiarity with the nitty-gritty details of your current plan helps protect your interests.
Who Determines the Fairness of Distribution in a QDRO?
A court can oversee your divorce and ensure an equitable distribution for both parties. It accounts for factors such as the length of the marriage and the contributions each party made to the retirement account.
Alternatively, couples are free to create the terms of the QDRO on their own. Mediation is helpful in these situations. An attorney with experience in splitting retirement accounts acts as a neutral third party, and they help the couple negotiate fair terms for the order.
How to Prepare for a High Asset Divorce with a QDRO
- Hire an experienced divorce attorney who understands high asset divorces and the impact of QDROs.
- Consider hiring a financial analyst to help determine the value of all assets and potential tax implications.
- Gather all financial information and documents, such as tax returns, bank statements, and retirement account balances.
Ford & Friedman can help you reach a fair retirement distribution in your high asset divorce. You can schedule time with our team by filling out our online contact form or calling us at (702) 904-9898.