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In many marriages, the retirement accounts of the couple may be one of the largest financial assets they own. When that couple divorces, questions arise as to how to equitably split up the retirement accounts.

The solution is a four-letter acronym known as QDRO (Qualified Domestic Relations Order). A QDRO is an order for the equitable division of retirement savings plans, pensions, 401(k)s and other retirement accounts. It allows a retirement plan administrator to make payments to the former spouse of an employee according to the divorce final judgment order entered by the court.

While QDROs are an excellent solution, many common mistakes are made using them. Here is a list of considerations and best practices regarding QDROs:

  1. Gather plan information. Retirement plans differ greatly from one another. It's important to find out exactly how the plan(s) at issue operate. Some plans may have early retirement buy-outs and other plans may be non-qualified plans that cannot be divided at all. This information must be gathered during the negotiation process before the parties sign an agreement. It's also helpful to have a QDRO expert on your side during negotiations.
  2. Volunteer to get the QDRO drafted. A common mistake is having both parties jointly draft the document. A QDRO is not a neutral document. It is drafted to benefit one side, so make sure that yours is the side it benefits.
  3. Don't delay the QDRO. Plan to have the QDRO entered simultaneously with the divorce judgment if possible. If that's not possible, have the QDRO prepared shortly thereafter. Don't delay.
  4. Don't follow an employer-provided sample QDRO religiously. It's meant to be a guide and will simply let you know the language the plan administrator is looking for. However, many employer documents leave out many key provisions that should be included for your protection.
  5. Include a valuation or division date in your agreement. This will avoid later disputes if an account suddenly plummets or skyrockets.

Make sure your New Jersey divorce lawyer follows these QDRO best practices to protect your future.

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Morristown, NJ 07960

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