Qualified Domestic Relations Order (QDRO)
What does Qualified Domestic Relations Order (QDRO) mean?
A Qualified Domestic Relations Order (QDRO) is a court order generally included in a divorce agreement when the court must determine the allocation of pension funds. The QDRO establishes a spouse's legal right to receive a portion of the other spouse's benefit payments. Consider, however, spouses are responsible for paying their own taxes when they receive payment from the pension or make a withdrawal. A Qualified Domestic Relations Order is critical to avoid paying taxes when an ex-spouse makes a taxable distribution.
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.