Some of you are probably scratching your heads and wondering what a Qualified Domestic Relations Order is (called a QDRO for short!). And who could blame you? It’s certainly not something the average person deals with on the average day. So what is it and why does it matter if you’re getting divorced in Oakland County, Michigan? That, it seems is the million dollar question. And we’re here to give you some of the answers…
So what is a ‘QDRO’ anyway, and why is it important?
Okay, let’s start with the basics. There are two terms you’ll need to keep in mind: Domestic Relations Orders (called DROs) and Qualified Domestic Relations Orders (QDROs). Confused? Don’t worry, we’ll make this quick and easy.
A Domestic Relations Order (DRO) is a court order recognizing the right of a spouse, former spouse, child, or other dependent to receive all (or part) of a participant’s benefit from an employee benefit plan. In other words, if you’re signed up for medical and dental care through your job, a DRO is a judgement from the Oakland County family court that divides up your pension or retirement plans for your spouse (or former spouse), or your kids, to benefit from those plans. Said another way, a DRO is a special kind of court order that is necessary to divide up most kinds of pension or retirement plans in a divorce case.
A Qualified Domestic Relations Order (“QDRO”) is pretty much the same thing, but it refers specifically to a DRO that’s met all the specific requirements of federal law, and the specific provisions of the Plan. In essence, a QDRO is a court order that requires a qualified plan to pay all or any part of a Participant’s benefits to an Alternate Payee (which just means the other person or people who are designated as beneficiaries on your plan.) A QDRO is a court order that would force your Plan to give benefits to your spouse (or former spouse), or your kids, or whoever else is entitled to receive them. The word “qualified” refers specifically to pension or retirement plans that are “qualified” under a federal law referred to as ERISA.
Why would a QDRO be important in an Oakland County divorce?
A Qualified Domestic Relations Order might not sound like something that plays a big role in your divorce, but that couldn’t be further from the truth! For many divorcing couples in Novi, Rochester and Troy, QDROs can make a huge difference to the way your assets are divided. How so? Well, when you consider the fact that more and more these days, retirement benefits are becoming even more important than the family home when divorcing couples are dividing their assets – it makes perfect sense!
In most divorces, a spouse has a right to half of the marital portion of the other spouse’s retirement benefit. (Which is NOT the same thing as half of the entire retirement benefit!). This just means that if you were making payments into your retirement account for ten years before you got married, and also for another ten years after your marriage until the divorce, your ex would only be entitled to part of the portion you paid on during the marriage. So as you can see, your QDRO would affect how much of your retirement benefits your spouse is entitled to after the divorce is final.
There is a lot involved when it comes to dividing up retirement accounts!
Divorce is a complex process, with lots of moving parts that require a skillful hand and a deft mind to figure out. Join us next time for more break down on QDROs (because this stuff can be confusing!). However, if you’re considering divorce in Bloomfield Hills, Royal Oak or Novi, and you have questions about dividing up your stuff, paying alimony, or figuring out custody, call The Kronzek Firm at (248) 479-6200. Our experienced Oakland County family law attorneys are available 24/7 to answer your questions and help you figure out what your next move should be. We’ve been at this for a quarter of a century now. Put our experience to work for you.