Dividing Retirement Accounts, The Right Way

Pensions which are marital property may be divided as part of the marital settlement. But there is a right way and a wrong way to accomplish that.

The right way is to use a Qualified Domestic Relations Order (“QDRO”). QDROs can be complex.

QDROs must comply with detailed retirement plan provisions, and even QDROs already entered by a judge may be ignored by the plan administrator with impunity under certain circumstances.

The moral is that pensions should not be divided as an afterthought or in a rush job. Both parties must work with the plan administrator to ensure that any QDRO is plan-compliant, accomplishes the parties’ objectives in the most advantageous way for both spouses and is entered by the judge simultaneously with the final judgment.

To drive the point home, there are law firms that specialize in drafting QDROs – and nothing else. Division of retirement accounts should not be done informally.

And the division may be deemed property division – or alimony.

Read more in this Chicago Tribune article: Court order needed to split retirement accounts in divorce.