If you are getting divorced, it's possible that you’ve heard your attorney or Certified Divorce Financial Analysist use the term QDRO (pronounced “qua-droh”). QDRO stands for Qualified Domestic Relations Order.
And you may be wondering what that is and whether or not you need one.
Not every divorce requires a QDRO but many do.
In this month’s edition of Graceful Exits, I explore the whats, whens, and whos of QDROs.
What is a QDRO?
A QDRO is a legal document, often written by an attorney that must be signed by a judge. It is a type of domestic relations order.
A domestic relations order is any judgment, decree, or order that relates to the awarding of marital property to a former spouse and is made pursuant to state domestic relations law.
In plain English, it is a document that lays out a divorced spouse’s rights to their ex-spouse’s employer-sponsored retirement plan after divorce.
Retirement Accounts in Divorce
The key thing to know here is that a QDRO is a legal document that is typically drafted in addition to a Divorce Decree to claim certain assets awarded in a divorce.
When do I need a QDRO?
Not every divorce case will need a QDRO. 
In fact, because they add costs and can be time consuming to implement, I try to design settlements that don’t require a QDRO where practical and where it serves the client’s interests.
Sometimes, though, QDROs are unavoidable.
QDROs are used to divide certain assets including 401(k) accounts, pension benefits, annuities, and any plans covered by ERISA. If you are dividing these types of assets, you’ll need to have a QDRO for each account or benefit being divided.
For example, if you are dividing two old 401(k)s and a pension, that’s three QDROs that must be drafted and implemented.
Who will draft my QDRO?
In many cases, your attorney will draft your QDROs.
Sometimes, if your ex-spouse works for a large employer, that employer will have pre-approved QDRO language that your attorney can use.[1]
In some cases, you may wish to employ a QDRO Specialist. A QDRO Specialist is exactly what they sound like: a professional who only writes QDROs.
This person may or may not be an attorney. Often, they are former attorneys or retirement plan administrators who have specialized training in this tricky intersection of family law and tax law.
In a case where you anticipate needing to tap into assets divisible by QDRO to meet an immediate post-divorce need (and you’re under age 59 ½), using a QDRO Specialist is a good idea.
Why?
Because your QDRO must specifically allow for the use of Section 72(t)(2)(C) of the Internal Revenue Code, which allows an alternate payee (that’s you) to take money out of the plan being divided without the normal 10% early withdrawal penalty.
If this language isn’t included in your QDRO and you take money out, you’ll likely get stuck paying a 10% penalty in addition to income taxes.
What happens after my QDRO is drafted?
Once your QDRO is drafted, it is best to have the retirement plan administrator review and approve the draft. This could take four to six weeks for even a simple QDRO.
After your QDRO is pre-approved by the plan administrator, it needs to be signed by the parties (that’s you and your ex-spouse) and then filed with the court. The judge will need to review and sign the proposed QDRO.
It is best to submit the QDRO at the same time as the Final Decree of Divorce; however, the judge can sign it later if necessary. Once signed by the judge, a certified copy of the QDRO must be sent back to the plan administrator for final processing.
Even if things run smoothly, this process can take months. If things don’t run smoothly, it can take many months. Patience is required.
What happens next?
Assuming all went smoothly, and the plan administrator has approved and processed your QDRO, the next step is for the plan administrator to create an “alternate payee account” in your name. 
Once that account is created, the assets awarded to you in your divorce decree (as outlined by the QDRO) will be placed in the account.
Congratulations!
The assets are now titled in your name and under your control — your QDRO journey is finished.
What should I do with the account?
At this point, you have several options that I’ve covered in detail in the article Retirement Accounts in Divorce. In most cases, you can leave the assets where they are, roll them over to another eligible retirement account, or cash out the account.
Each option has pros and cons, and you should consider your choices carefully before proceeding. Having an expert like a Certified Divorce Financial Analyst™ (CDFA®) on your team can be very helpful in making these choices.
Taking a Team Approach to Divorce
Many clients believe that once their Divorce Decree is written and they’ve gotten the judge’s signature, the work is over. But that’s often not the case — there can be weeks or months of follow up as you move through the many post-divorce administrative tasks that await you.
You don’t have to do it alone. CDFA® Professionals like me are here to help.
Are you navigating the post-divorce process alone?
Schedule your free one-hour consultation today!
Fact checking for this article kindly provided by Candace B. Demary, JD of The Law Office of Candace B. Demary.
The Law Office of Candace B. Demary and Baird are not affiliated.
[1] This can save you a buck or two in billable hours since your attorney doesn’t need to write the order from scratch.
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