Divorced spouses in Texas and around the country are sometimes surprised to learn that a court-approved divorce settlement is not sufficient to divide retirement funds. Federal law stipulates that employer-sponsored retirement plans can only be divided in a divorce if a qualified domestic relations order, or QDRO, is in place. Securing this document is a two-step process. The first step is petitioning a family court to issue a domestic relations order. The domestic relations order becomes qualified when it is accepted by the retirement plan administrator.
Retirement funds are significant assets
This process is important because spouses usually divorce long before they plan to retire, and the money placed in retirement plans is often among the most valuable assets in a marital estate. A properly drafted divorce decree sometimes meets the legal requirements of a QDRO, but a separate document is usually needed. A QDRO can be issued years after a couple has divorced, but it does not go into effect retroactively. This means retirement funds that were paid out before a QDRO was issued cannot be divided.
Not all divorced spouses can obtain a QDRO
QDROs are only issued if the divorce decree states that retirement funds should be divided. If these funds are not mentioned, the court will reject QDRO petitions. In these situations, the only way to divide retirement funds is to reopen and re-litigate the divorce. This is a complex and costly process that can drag on for years.
Avoiding common divorce pitfalls
Experienced family law attorneys may help their clients avoid common divorce pitfalls by conducting a thorough assessment of marital assets before property division negotiations begin. Attorneys might also help spouses obtain a QDRO by identifying plans, filing the court paperwork and then contacting the plan administrator to ensure that the document is accepted.