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Articles on Divorce: Financial

Your Spouse's Retirement Plan... What Women Need to Know about QDROs
by Judy Morris

If you are a woman that is going through the painful process of divorce, it is important to know all that you are entitled to -- a difficult task during such an emotionally devastating period in your life.

Not only is divorce a complex legal matter; it is also a complex financial matter. It isn't as simple as splitting everything in half -- the key word being "everything." What does everything mean? What does everything entail? It is easy to trust that your attorney will handle "everything" and make sure that you get exactly what is rightfully yours according to the laws of your state. However experienced or knowledgeable your attorney might be, there are still matters of great importance that he or she can overlook. You must have some knowledge yourself.

One of the most important matters (and the most frequently overlooked), in my opinion, is the pension plan. The good news about this subject is that the divorce laws in every state consider a pension earned during the marriage to be property of both husband and wife. The not-so-good news is that your half is not automatically awarded to you at the time of divorce. In order to receive a portion of your husband's pension(s), you must ask for it along with your other requests at the time of divorce -- not later when your husband retires. Upon your request, the court should award you a share as part of the divorce agreement. If your husband has more than one retirement plan (401 (k) or other), then your settlement agreement must refer to each plan separately in order to get benefits from all.

The more information you have on your husband's benefits, the better. You can call his company's benefits office to request information. In most cases, your attorney will have to request this information in writing, but the law does consider you the beneficiary with the right to receive information. If you are getting divorced, you should notify the pension plan to prevent paying out your share of the pension to your husband via a premature distribution.

There are many different ways that a pension can be divided. If you want to receive a survivor's pension, you will need to have that specified in the divorce decree or property settlement. If your husband previously chose a survivors benefit for you, you are entitled to receive it regardless of the divorce (unless it's a government pension).

In order for your rights to be recognized by the pension plan after the divorce you will need to obtain a separate court order. This special order is called a Qualified Domestic Relations Order, or QDRO (pronounced "QUADROW"), which your attorney prepares. When the court issues a QDRO awarding you a share of your husband's pension, a copy must be sent to the pension plan immediately.

In most cases, the pension plan that receives the QDRO will want to be sure of the following two things:

That the court order contains all the information necessary so the plan knows whom, what, and when to pay.
That the court order does not require the plan to pay you in a non-orthodox fashion which would be otherwise inconsistent with the rules of the plan.

So, once your divorce proceedings have begun, have your attorney get in touch with the plan administrator for the written QDRO procedures. Each pension plan is different, and some companies even have their own QDRO forms in order to simplify things for all parties involved. Your attorney is responsible for the preparation of the QDRO.

Make sure that you settle all pension issues before your divorce is final. If the pension is mentioned in your property settlement, but you don't get a QDRO at the time of your divorce, then you will have to go back to court later to obtain it. This translates into additional legal fees and the increased risk of losing your share.

When discussing the pension plan, be wary of tempting trade-offs that may be offered by your spouse. For example, your husband may offer to trade the house or some other tangible asset in exchange for your written relinquishment of your interest in his pension plan. Keep in mind, however, the value of your share of the pension may be higher that the value of the assets you are offered. Arm yourself with information that you have the right to know, including the value of the pension plan and your share of it. Doing so will allow you to make better decisions and retain what is rightfully yours in a divorce.

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Judy Morris is Financial Advisor for Crowell, Weedon & Co. in Pasadena, California. She specializes in issues regarding the allocation of assets from settlements. She provides investment advice that is geared toward each of her client's unique situation. She is a member of the Coalition for Cooperative Divorce and conducts financial workshops for women in the San Fernando, San Gabriel Valleys. If you would like to reach Ms. Morris you can contact her at: (626) 449-0330 or via e-mail at jmorris@crowellweedon.com.

The opinions expressed in this report are that of the author and do not necessarily represent that of Crowell, Weedon & Co. This report is not to be considered an offer to buy or sell securities nor is it to be construed as investment or legal advice.

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