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January 2025

What is the Purpose of a Qualified Domestic Relations Order (QDRO)?

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The average American household has approximately $87,000 saved for retirement across various accounts, and these accounts are often involved in family law disputes. However, early withdrawal from these retirement plans can result in significant taxes and penalties.

In certain family law matters, particularly divorce, a Qualified Domestic Relations Order (QDRO) is essential. A QDRO is a legal order that recognizes an alternate payee’s right to receive a portion of the retirement benefits from a plan participant. Without this order, transferring or withdrawing funds from the account could be costly and legally problematic.

When Do You Need a QDRO?

One of the most common scenarios requiring a QDRO is divorce. In Washington State, assets acquired during a marriage are typically considered community property and must be divided equitably between the spouses. The court generally totals the value of all community property and divides it equally.

Often, a retirement account, such as a 401(k), is among the largest marital assets and needs to be divided. Each spouse will leave the marriage with a designated portion of the account.

For example, consider John and Sarah, who were married for 15 years. During this time, John’s 401(k) grew to $200,000. The couple has additional savings but no real estate assets. During the division of community property, the court awards Sarah $40,000 from John’s 401(k), leaving John with the remaining $160,000.

A QDRO is necessary to establish Sarah’s legal right to $40,000 from the account. Since she is neither a plan participant nor a designated beneficiary, the retirement plan administrator will not transfer any portion of John’s 401(k) to her without a valid QDRO.

While dividing community property is the most common reason for a QDRO, it may also be required in other family law matters, such as to fulfill child support obligations.

Where Do You Get a QDRO?

A QDRO is obtained through the court handling your divorce. The court can issue the order directly or formally approve a proposed property settlement agreement that includes the QDRO.

A QDRO must contain specific information, including:

  • The names and mailing addresses of both the plan participant and the alternate payee.
  • The name of each retirement plan the QDRO covers.
  • The percentage or dollar amount to be paid to the alternate payee.
  • The number of payments or the time period the order applies to.

It is equally important to avoid including prohibited provisions, such as requiring the retirement plan to provide benefits or options not originally available under the plan. For this reason, working with an experienced family law attorney is essential to ensure the QDRO is correctly drafted.

After submission, the retirement plan administrator will review the order to confirm it qualifies as a QDRO. If the administrator rejects the order, affected parties have the option to challenge the decision in court.

Do You Always Need a QDRO?

Not necessarily. If your divorce does not involve the division of retirement accounts, you may not need a QDRO. For instance, if John and Sarah both had their own retirement accounts and other assets, the court could divide those assets equally without requiring Sarah to receive any portion of John’s 401(k). In such cases, a QDRO would not be necessary.

Call to Speak with an Experienced Family Law Attorney

Dividing community assets, particularly retirement accounts, can be complex and filled with hidden challenges. Amanda J. Cook has extensive experience helping men and women navigate divorce and QDRO-related issues. Contact our office today to schedule a consultation and ensure your rights are protected during this critical process.

Qualified Domestic Relations Orders in Washington State

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Anyone planning for a divorce in Washington State who has retirement assets likely to be classified as community property must understand qualified domestic relations orders (QDROs). In a Washington State divorce, property classified as community property—unlike separate property—must be divided between the spouses in a manner that is “just and equitable” under state law. For many couples, community property includes retirement accounts and benefits, such as 401(k) accounts, 403(b) accounts, individual retirement accounts (IRAs), and pensions. To divide these accounts or benefits, a judge must issue an order known as a QDRO.

What is a QDRO in Washington State?

A QDRO, as defined by the U.S. Department of Labor, is a domestic relations order issued by a court that “creates or recognizes the existence of an ‘alternate payee’s’ right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan.”

What does that mean in practical terms? In short, a QDRO is a court order that allows a judge to allocate a portion of one spouse’s retirement account or benefits to the other spouse without incurring penalties or taxes associated with an early withdrawal.

Understanding the Need for QDROs in Washington State

Why are QDROs required in Washington State divorces? In other words, why can’t retirement benefits be divided like other marital assets?

Retirement accounts and pensions are governed by specific rules concerning withdrawals and distributions. When a retirement plan distribution is made before the participant reaches retirement age, the Internal Revenue Service (IRS) assesses income taxes and an additional 10% penalty tax for early withdrawal. While certain exceptions may allow a participant to avoid the early withdrawal penalty, these exceptions rarely apply in divorce cases. In addition to the penalty, any distributions are added to gross income and taxed accordingly.

A QDRO allows retirement benefits to be divided without triggering income taxes at the time of the division and avoids the 10% early withdrawal penalty.

Ways of Dividing Retirement Benefits Through a QDRO

Through a QDRO, retirement benefits can be divided in several ways, such as:

  • Designating a percentage of one spouse’s retirement account to the other spouse, with the distribution occurring when the other spouse reaches retirement age.
  • Designating a specific dollar amount of one spouse’s retirement account to the other spouse, with the distribution occurring when the other spouse reaches retirement age.
  • Transferring a percentage or specific dollar amount from one spouse’s retirement account into a newly created retirement account in the other spouse’s name.

When multiple retirement accounts are classified as community property, a QDRO can address each account and specify how it will be divided.

Contact a Washington State QDRO Lawyer

If you are considering divorce or have questions about QDROs and the division of retirement assets, an experienced Washington State divorce attorney at the Law Office of Amanda J. Cook can provide guidance. Contact us today to discuss your case.