You mean, there is more work to do after the final divorce decree is signed?!?!?
Yes, unfortunately the long process to get to your final decree is not the end. Once the decree is signed, now the actual work of separating the assets, as detailed in your agreement, begins.
I have heard over and over that individuals post-divorce have split everything, but there is one retirement account that they just haven’t messed with. Some investments do require a little more time, energy, and financial cost to split, such as ERISA covered plans like 401(k) plans, 403(b) plans, pensions, 457 plans, deferred compensation plans, some RSU, and restricted stock unit accounts. These types of plans require a Qualified Domestic Relations Order (QDRO) to be filed with the plan administrator. Once the QDRO is submitted and the assets split, then the non-employee spouse can roll the funds to an IRA account for future management. Note: Even though an IRA is a qualified account, they do not require a QDRO; a signed divorce decree is sufficient documentation to split that account.
One of the special features that individuals have with a QDRO is a ONE-TIME opportunity to take a withdrawal in which taxes are owed but AVOIDS the 10% TAX PENALTY if the distribution is taken prior to 59 ½. This could be beneficial in providing some needed financial flexibility, but if not done properly you could miss that special window.
As a Certified Divorce Financial Analyst® our firm acts as a liaison to a local Houston QDRO drafting service. We can help aid you in the process, as well as make sure that you have defined if and how much of an up-front distribution you may need from the plan. In Texas, if the QDRO is not started within 30 days of the decree being filed, a separate motion must be filed with the courts throughout the process. For this and many other reasons, such as a tracing nightmare, it is imperative that you complete the QDRO process as quickly as possible once the decree is finalized.
The QDRO process is not for the faint at heart and following a long divorce settlement process can be downright overwhelming. Contact us at Next Step Divorce Solutions, your local Certified Divorce Financial Analyst®, and we will help walk you through the QDRO process one step at a time to get everything done in a timely and efficient manner.