Qualified Domestic Relations Orders or QDRO
As discussed in this article, a Qualified Domestic Relations Order, or QDRO helps spouses that are dividing retirement or deferred compensation accounts avoid a tax penalty.
To understand why a QDRO is so valuable, let's use the following example: Imagine a couple getting divorced in Sarasota, and, over the course of the marriage, one spouse has accumulated a significant tax-deferred retirement account.
Florida law on equitable distribution states that in a Florida divorce, anything that was accumulated during the marriage (including debt), should be divided between the parties at the time of divorce. The presumption is that Florida divorce courts will divide pensions, IRAs, or any other retirement account equally between the spouses at the time of divorce.
So now one spouse is getting half of the other spouse's pension. If the money is simply taken out of the retirement plan, the spouse holding the plan is going to have a significant tax penalty. How do divorcing spouses transfer that retirement account without getting penalized by the I.R.S.?
Florida allows the use of a QDRO, or Qualified Domestic Relations Order to transfer the funds directly into the retirement account of the other spouse. Because the funds were never removed, they were just "converted" to another tax deferred account, no tax penalty occurs.
How much does a QDRO cost? Having a QDRO drafted by a qualified Florida QDRO attorney is surprisingly reasonable, usually amounting to the equivalent of two to three hours of billable time for your Florida divorce attorney.
Sarasota divorce courts, and sarasota divorce attorneys are all familiar with the significance of a well drafted Florida QDRO. Call us today at (941) 404-8908 to talk about how a Florida divorce may impact your pension or retirement account.