Q. What is a QDRO?

Dear Donna,

What is a QDRO? Can the money from a QDRO be transferred directly into an IRA or bank account? ~Puzzled in Peoria

Dear Puzzled,

QDRO (pronounced ‘QWA-dro’) stands for Qualified Domestic Relations Order.  It is a special type of order issued by a divorce court that allows the divorce court to divide federally regulated employee pension and retirement benefits that otherwise would be off-limits to the non-employee spouse.  For example, 401ks are federally regulated retirement benefits that normally cannot be reached by anyone but the employee.  But a special law was enacted to allow divorce courts to divide these employment benefits in connection with divorce. 

Typically, a QDRO will operate to move some of the 401k assets into a newly created IRA account for the non-employee spouse, thus preserving the pre-tax nature of the money.  The IRA could be located at a bank or other entity offering IRAs. 

There are also some creative ways to use QDROs, such as for getting rid of large consumer debt at the end of a marriage, and for collecting arrearages of support.

Most communities have lawyers who specialize in QDROs and financial planners who specialize in divorce are also frequently familiar with the creative uses of QDROs. 

Good luck,

This article is not legal advice. You should consult an attorney if you have legal questions that relate to your specific divorce.

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