Divorces in Fort Worth, Hurst, Bedford and other parts of Tarrant County often include retirement accounts and other retirement savings as part of the property division in the divorce. These retirement savings can be complicated for a variety of reasons. Many types of retirement accounts are tax advantaged which creates issues dividing and, sometimes, cashing out those plans. They often also include various types of investment vehicles that can be difficult to properly value. A significant problem in diving retirement savings in a Texas divorce is dividing retirement accounts in an employer-sponsored plan.
Many of these retirement plans are governed by complex federal laws like ERISA but may also be covered by Texas state law or other federal laws or regulations. ERISA plans, like 401k and many private employer pensions, require special orders to divide retirement assets between the spouses. These orders are called qualified domestic relations orders, or QDROs. QDROs generally should be drafted by a QDRO lawyer or Bedford divorce attorney to ensure they are properly drafted and executed by the judge. What is a QDRO written by a Bedford divorce attorney? A qualified domestic relations order is a special order that divides ERISA-governed retirement plans and certain other employer-sponsored retirement plans. A QDRO is a court order that directs the plan to make a transfer of assets owned by the employee (or retiree) to the former spouse as part of the divorce. (A QDRO can also be used for child support or spousal support purposes, but the vast majority of QDROs are property division in a divorce written by a divorce lawyer.) The reason for QDROs is that ERISA prohibits a retirement plan from giving a participant's assets to a creditor or other party and preempts state laws that might authorize such a transfer. To avoid isolating these assets in a divorce, ERISA permits QDROs to make that transfer as part of the divorce proceedings. A divorce attorney may draft a QDRO to ensure the property division occurs in the right manner. Without a QDRO the former spouse receiving part of the 401k or pension must rely upon the employee-spouse to voluntarily share the retirement account proceeds whenever he or she takes funds out of the account. That might be a problem years or decades down the line. How can a Bedford divorce attorney help with a QDRO? A major problem with a QDRO in a divorce is that the QDRO requires specific language to properly accomplish its goals. The QDRO must contain certain provisions to bind the plan to following the order. The divorce attorney must draft the QDRO to accurately identify the plan, the participant and the alternate payee. The QDRO must also specifically and clearly describe the manner in which the retirement plan assets will be divided and assigned to the alternate payee. The absence of these provisions will render the QDRO worthless. Additionally, if the QDRO improperly describes the method of dividing the plan the alternate payee may end up less than what was awarded in the divorce or may take far more from the participant than what was awarded in the divorce. A mis-drafted QDRO can result in costly litigation down the line to try to correct the errors in the QDRO that could have been easily resolved with proper QDRO drafting. For this reason, parties to a divorce, even an uncontested divorce, should strongly consider hiring a Bedford divorce attorney or Fort Worth divorce attorney to draft the QDRO. Comments are closed.
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AuthorDivorce attorney in Bedford working with divorce, uncontested divorce, custody, child support, property division, QDRO, spousal support and alimony ArchivesCategories |