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What is a QDRO?

On Behalf of | Nov 14, 2023 | Divorce |

When couples get divorced, they are required to divide their assets. Most of these assets are things that they already own. They have to decide how to divide up the contents of a shared bank account, for instance, or they have to sell their family home and split up the proceeds.

But there are also future assets that may need to be considered. For example, maybe only one of the partners is employed. They have been earning a pension plan from their employer. The married couple was planning to retire together, with both of them using this pension plan. But the partner who is employed is still working, so they don’t actually have the value of that plan and they are not getting any monthly pension payments.

Dividing future earnings

This is when a qualified domestic relations order (QDRO) may come in helpful. This document can be used to divide those financial assets in the future. It can set up the other spouse, who is not the employee, as an alternate payee.

For example, say that the pension is eventually going to pay out $8,000 per month. For half of the time that the employee was working, they were married. This means that only half of that value is a marital asset and needs to be divided – or 25% of the total. The QDRO could stipulate that the alternate payee gets $2,000 per month, while the person who earned the pension gets $6,000 per month. 

These numbers are just examples, as every situation is unique. Couples who find themselves involved in this process must understand what legal steps to take.