If you are getting a Louisiana divorce, one of the documents you might need to include with your community property settlement is a qualified domestic relations order (QDRO).
But what does that even mean? A QDRO is a legal document that may arise from divorce judgments if one or both spouses had retirement plans covered under the Employee Retirement Income Security Act (ERISA).
Why you might need a QDRO
These orders designate a specific percentage of the working spouse’s retirement plan assets. These benefit allocations may go to former and current spouses, children and other dependents. While 401(k)s are affected, IRAs are exempt.
Without this legal document filed with and signed by the court and approved by the retirement plan administrator, the alternate payee won’t have access to these benefits.
QDROS must be detailed and specific
QDROs can be invalidated if they fail to contain the following information:
- Each plan name for the applicable order
- Legal name and the last known mailing addresses of both the alternate payee(s) and the plan participant
- The timeframe for the order to be applicable, and the number of payments
- Percentage of the retirement benefits to be paid or a specific dollar amount
Each QDRO may have additional details that must be included. The plan administrator can provide you or your attorney with everything necessary to complete the order.
Alternate payees and plan participants should be aware of any tax ramifications stemming from the retirement benefits they receive in the property settlement of their divorce. Always consult with your tax adviser and/or financial planner to ensure that you pay the least amount of taxes.