Qualified Domestic Relations Order QDRO

Definition of Qualified Domestic Relations Order Qdro

A Qualified Domestic Relations Order is a court order generally included in a divorce agreement which establishes a spouse’s legal right to receive a portion of the other spouse’s pension benefit payments following the divorce.

QDROs must contain the name and last known mailing address of both spouses, the name of each plan, the dollar amount or percentage of the benefit to be paid to the alternate payee, and the number of payments to which the order applies.

The laws and regulations for creating a QDRO can be complicated and should be discussed with a tax attorney. For instance, a Qualified Domestic Relations Order is critical to avoid paying taxes when an ex-spouse makes a taxable distribution. Consider, however, spouses must pay their own taxes when they receive payment from the pension or make a withdrawal. A QDRO may be included as part of a divorce decree or court-approved property settlement or issued as a separate order without affecting its qualified status.

Prior to creating a QDRO and finalizing a divorce, it is a good idea to consult with a tax attorney. To create the QDRO the lawyer will need the name and mailing address of the plan participant and alternate payee, the amount of money or percentage to be paid to the alternate payee from each account, and the number of payments or benefits period covered by the QDRO.

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