Qualified Domestic Relations Order
A court uses a Qualified Domestic Relations Order (QDRO) to take funds from the retirement account of one spouse and uses it to provide child support or alimony payments to the other spouse, or to divide the marital property of a couple in a divorce. For the account to be accessed by a QDRO, it must be a retirement account.
Also, a court, or other state authority must issue the order. As such, even if you and your spouse agree to a Qualified Domestic Relations Order between yourselves in a settlement agreement, it will not be effective unless a court approves it.
Features of a Qualified Domestic Relations Order
The following lists a few features of a QDRO:
- Benefits received by a spouse under a Qualified Domestic Relations Order are taxable, even if they are being paid in place of child support payments, which are usually not taxable.
- A spouse can defer the immediate tax on the received payment by putting the money in an individual retirement account.
- A QDRO can assign all of the retirement funds, or a part of the retirement funds to the spouse receiving the funds.
- The benefits will not be available until the beneficiary him or herself becomes eligible under the retirement account’s terms.
- A QRDO cannot change the terms of the retirement plan itself, that is, it cannot require the funds to be released at an earlier date, or add additional terms to the retirement account.
Under a QDRO, a spouse can start receiving benefits at the earliest retirement age, or sooner, if the retirement plan itself allows for such a provision.
