QDRO stands for Qualified Domestic Relations Order. It has to do with splitting up retirement assets in a divorce. The law in Illinois says that retirement plans are the joint property of both spouses, at least the portion that was earned or acquired during the marriage.
Retirement plans are marital assets, and in a divorce, all marital property is to be divided equitably. If the spouses can’t agree, then the judge will decide how to divide things. In general, it doesn’t matter whose name is on marital property. Real estate, retirement plans, pensions, bank accounts – if it was earned or acquired during the marriage, then it’s marital property. On the other hand, some stuff can be a spouse’s separate property, but it has to have been earned or acquired before marriage. Certain gifts, as well as inheritances, also remain a spouse’s separate property in most cases.
Retirement plans, including 401ks, IRAs and pensions, are difficult to divide, since they aren’t like cash. Their current value might be unclear. They’re also complicated by the fact that they might be partially separate property (the part earned before the marriage) and partially marital property (the part earned since the marriage). This is where the QDRO comes in.
Experts and accountants are often used to research the value of a retirement plan, especially something like a pension that pays out a certain amount at a set time in the future. It’s not easy to put a current value on it without an expert. Once it’s decided how the assets will be divided, the QDRO is an order from the court telling the retirement account administrator exactly how to divide the account, usually by creating separate accounts in each spouse’s name.
There are other options. If spouses have fairly equal retirement plans, then they might decide to each take their own. Even if they aren’t equal, they can agree to this if they wish. If you don’t want to split the retirement plan, then other property can be divided in a way that offsets the value of the retirement plan – Spouse A keeps his or her retirement plan, and Spouse B gets the house, for example.
The main thing to remember is that you shouldn’t rely on an informal or partially-formed agreement when it comes to getting your half or share of a retirement plan or pension. And don’t fall into the trap of putting off the QDRO until after the divorce. At that point, there isn’t as much or an incentive to resolve things and you might have to go back to court to make it happen.
If you are dealing with this issue or any other Illinois legal issue, we are happy to help you at any time.