201705.10
0

Can I Get A QDRO For A Partition Agreement Without Divorce?

Many judges and lawyers are unaware that retirement funds can be transferred between spouses via a QDRO even when no divorce is filed. This is useful as part of a postnuptial agreement. A QDRO can be signed by a judge to protect the portion of a spouse’s retirement given to the other in the postnup.

A postnup might give one spouse some of the other’s retirement. The retirement plan may ignore the postnup. It is not binding on a retirement plan. The only way to make the plan give some of the funds to the other spouse is with a Qualified Domestic Relations Order (QDRO).

If a divorce occurs, the non-employee spouse might find there are no funds in the 401(K) because the other withdrew them. A QDRO when the postnup is signed will require the plan to safeguard the non-employee’s share, ensuring it’s available if a divorce occurs, or when the employee spouse dies.

After the funds are transferred into the name of the non-employee spouse via a QDRO, tax laws now apply to the non-employee spouse. That person may withdraw funds, but may have a portion withheld and owe taxes and penalties, depending on the person’s age when the withdrawal is made.

A postnup that awards a spouse some of the other’s retirement should be accompanied by a QDRO. This will increase the cost of the postnup but the added cost is minimal compared to the funds in retirement that might not be available later.

Latest posts by McNamara (see all)