Qualified Domestic Relations Orders in Oakland County: What You Need to Know (Pt 2)

Sign pointing towards retirement
How your retirement account gets divided in your divorce can make a big difference to your financial future.

Welcome back and thanks for joining us here at The Kronzek Firm’s office in Farmington Hills. We’ve been talking about Qualified Domestic Relations Orders (called QDROs for short) here in Oakland County, and how that could affect your divorce. As we mentioned in the previous article, QDROs are important because when you get divorced, your spouse usually has a right to half of the marital portion of your assets – which could include a part of your retirement accounts!

Worried? Don’t be. It sounds scarier than it is. But in order to understand exactly how a QDRO could affect your divorce in Troy, Novi, Royal Oak or Bloomfield Hills, we’re going to have to break down a few important points for you. For example, how QDROs get divided, and what exactly counts as an employee benefit plan here in Michigan. So strap in, let’s hit the road…

How do you divide a QDRO when you get divorced?

The Employee Retirement Income Security Act of 1974 (called ERISA) is a federal law that allows courts to divide retirement benefits in a divorce. As long as the spouse receiving the benefits rolls the sum into their own retirement account, the division doesn’t have any immediate tax consequences.

So when a divorcing couple in Oakland County, Macomb County or anywhere in Metro Detroit agrees to divide retirement benefits, the court enters a Qualified Domestic Relations Order, or some other kind of domestic relations order (DRO) which directs a plan administrator to set aside part of an individual’s retirement plan (“the participant”) for a former spouse (or “alternate payee.).

This might sound like a really simple process, but the truth is, it’s actually unpleasantly complicated, and involves a lot of red tape and bureaucracy. In fact, there are many attorneys who don’t do QDROs themselves because of the complexity. Instead, many of us choose to involve lawyers that specialize in drafting these very complex kinds of court orders.

What counts as an employee benefit plan?

Medical and dental plans are usually what comes to mind when people think of employee benefits. However, there are lots of different retirement plans that would count as employee benefit plans, which means there are lots of Plans that your ex might be able to claim benefits from after a divorce. (Which is why we’re explaining this – because it can really affect a divorce!)

So here are some of the more common ones (it’s not a complete list though, so always talk to your divorce attorney if you have questions about what might be covered under a QDRO.)

  • IRAs
  • Self Directed IRAs
  • Roth IRAs
  • TSP
  • Deferred Compensation
  • Pensions

Do you have questions about how your assets will be divided up?

The issue of property separation, or asset division, can be a very important one for many people, especially here in Oakland County. So if you live in Farmington Hills, Birmingham, Ferndale or Auburn Hills, and you’re considering divorce, call The Kronzek Firm at (248) 479-6200. Our skilled and experienced family law attorneys can answer all your questions about dividing up your stuff, paying alimony, or figuring out custody. We’re available 24/7 to help you figure out what your next move should be, and prepare you for the next season in your journey.