A Qualified Domestic Relations Order (QDRO) is an order issued by a state authority or court, which provides funds from the retirement account of a divorcing individual to his or her spouse. This is done to pay alimony or child support payments, or to split up the marital property.
Requirements for a QDRO
For a Qualified Domestic Relations Order to be issued by the court, the court must have information:
- on the total amount of payments to be made
- on the periods for which payments must be made
- on the names and addresses of the divorcing individuals
- about the retirement account out of which the QDRO will be set up
Features of a QDRO
A Qualified Domestic Relations Order has the following features
- A QDRO does not affect the basic rules of a retirement account. For example, funds cannot be withdrawn earlier than what the retirement plan allows.
- The benefits to be received under a Qualified Domestic Relations Order are taxable, even if they are being paid in place of child support payments, which are usually not taxable.
- The recipient of the benefits can defer the tax payments by investing the amount in an Individual Retirement account.
- Although used mostly in divorce cases, a Qualified Domestic Relations Order may also be set up for a legal separation case.
- The account to be used must be a retirement account.
- Previous alimony and child support payments can be paid with a Qualified Domestic Relations Order.
There are a number of other factors concerning QDROs that a person going through a divorce should consider before proceeding with his or her case.
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