Sharing community property is an essential part of a divorce case in Texas. It is presumed that all property owned at the time of your divorce is community-owned and therefore divisible by a family court judge. Even as some of the property in your life is divided between your and your spouse's separate estates most of your property is probably subject to division. This is especially true if you and your spouse have been married for a considerable length of time. In a situation where you all need to divide community property, you and your spouse must understand the circumstances and what is at stake in your case.
The way community property will be divided by the judge is through a “just and right” division. A just and right division does not necessarily mean equal or 50/50 although it sometimes does. Rather, a just and right division of your community estate has more to do with equity than it does with equality. Equity means fairness in taking into consideration all the different circumstances of your life and that of your spouse. Your ages, health levels, education levels, and job history are relevant to this discussion.
When do you think about the property that will be divided in your divorce what do you think about it? Your vehicles, home, personal property, and other investments probably come to mind. One of those types of investments that takes on added importance in a divorce is your retirement savings. Depending on your situation and work history you could have retirement savings in a 401(K), Individual Retirement Account, or even a pension.
For many of you reading this blog post, your retirement savings represents a lifetime's worth of work saving, being diligent, and delaying gratification to be able to preserve enough money to be able to live on in your golden years. This statement is just as true for you if you were the spouse who did not work outside the home. Your efforts to raise kids, take care of the home, and support your spouse through their work endeavors helped to contribute a great deal to the household. So, this is not a discussion just for those of you who worked and contributed directly to a retirement account. Rather, this is an important discussion for all married people who are going through a divorce case.
When it comes to dividing up a retirement account, a Qualified Domestic Relations Order or QDRO is probably the most important part of the process involved in dividing up retirement benefits after a divorce in Texas. There are certain terms and concepts related to divorce that you need to be familiar with as you head into a divorce. A QDRO is one of those documents. It is not something that you would likely be familiar with. Our goal in today's blog post is to provide you with a basic understanding of what a QDRO is and what this document is, what you need to do about it and how it stands to help you and your spouse conclude your divorce case.
Make no mistake, we are going to walk through several important concepts regarding retirement, savings, and QDROs in today's blog post. We want to do so in a way that is relatable so that it sinks in and helps you. However, if something that we discuss leaves you scratching your head then I recommend that you contact the Law Office of Bryan Fagan today. Our licensed family law attorneys offer free of charge consultations six days a week in person at our two Houston area office locations, over the phone, and via video. We pride ourselves on our availability to the community and want to make sure that this blog post helps you as much as possible in preparing for and completing your divorce.
What is a Qualified Domestic Relations Order?
As you may have guessed, given its name, a Qualified Domestic Relations Order is an order that will be signed by a judge after your divorce if a retirement savings account needs to be divided between you and your spouse. It is a document that orders your or your spouse’s retirement plan administrator to divide up the retirement account according to the terms of your final decree of divorce. The final decree of divorce will contain the instructions on how to divide up the retirement account. However, because the final decree of divorce is a quite lengthy document it will be impractical to have this document be the one sent to the retirement plan administrator. As a result, a shorter, more concise, and direct document like a qualified domestic relations order comes in handy in this regard.
From the retirement plans perspective, the most important person that you will be corresponding with is the plan administrator. This is the person that oversees any changes to the plan and helps employees update investments or make changes for beneficiaries of the retirement plan. The plan administrator will work with you or your attorney to make sure that the language included in your qualified domestic relations order is acceptable and will sufficiently divide the plan in the way outlined in your divorce decree.
The key to this entire discussion is making sure that your qualified domestic relations order contains language acceptable to the administrator for your or your spouse’s retirement plan. You can verify this before the divorce by simply contacting the plan administrator before your retirement plan or your spouse’s period from there, you can get a sample of the sort of language that must be included in your qualified domestic relations to be accepted by the plan administrator. Please note that if you submit language to a judge in an order that is not acceptable to the administrator the plan administrator may ask you to go back and have the order revised. This requires additional work to not only revise the order but obtain the judge's signature on the updated document. Time and money can be lost if you do not work with the plan administrator sooner rather than later.
How do you know for sure that you need a qualified domestic relations order to divide up retirement benefits?
As we talked about a moment ago, some people operate under the assumption that all they need to do to get their hands on the portion of a retirement account promised to them in a divorce is to send a copy of their divorce decree to a retirement plan administrator for division. I have had clients ask me if a simple email to the plan administrator will work as far as dividing up a retirement account. The reality, however, is that a final decree of divorce put you and your spouse in a position where you must follow its terms. This does not bind anyone else. With that said, an additional document must be provided to the plan administrator to divide up the retirement plan successfully. The qualified domestic relations order will be the form that you need to submit to a plan administrator to complete the division of their retirement plan.
What the qualified domestic relations order in Texas does is order the retirement plan administrator to cooperate with you and your spouse in dividing retirement plan funds according to the terms of your final decree of divorce. Whether you have a 401K, profit sharing, or a different type of retirement plan you will need a qualified domestic relations order to get your share of the retirement account at the time your divorce comes to an end. This is more reason to make sure that you are working with an attorney who was experienced in matters related to the creation of qualified domestic relations orders and can see to it that the money gets to your bank account sooner rather than later.
The domestic relations order part of your QDRO will divide the retirement account and will tell the plan administrator what portion of the specific plan will go to you or your spouse. The proportion that goes to you and the proportion that goes to your spouse can be determined one of two ways. The first is through private negotiation throughout your divorce case. This can be informal negotiation or done through a mediator. The second method would be to have a trial where a judge determines how much of the retirement account goes to you and how much goes to your spouse. Either way, the result would be that the final decree of divorce reflects either your private settlement language about the division of the retirement plan or the order set forth by a family court judge.
If you and your spouse can successfully settle your case in mediation, then the mediated settlement agreement that comes out of mediation is not the final order for your case. Rather, you and your spouse must submit a final decree of divorce to the judge in your case for his or her review and ultimate signature. When you have a final decree of divorce with all your signatures and the judge’s signature then you have an order that is fully executed. At that point, the order would go into full effect.
Next, he needs to learn how you can qualify the domestic relations order that you or your spouse’s attorney have drafted. As we talked about a moment ago, you need to make sure that the domestic relations order contains all the necessary information in language as set forth by the retirement plan administrator to distribute the money to you or your spouse. The best thing for you to do in this situation would be to send your proposed qualified domestic relations order to the plan administrator before the end of your divorce to make sure that the language coincides with what is required by the retirement plan. Your failure to do this can delay your case and it up costing you a great deal of time and money.
Once you are in a position where the plan administrator has looked over your proposed qualified domestic relations order and approves it as far as having all the necessary information and language then you can submit that to the court for its approval. You may want to do this before submitting your final decree of divorce. This way, the judge can review all language at the same time & off on everything on the same day. just like with your final decree of divorce comma once the court reviews the qualified domestic relations order and approves it the judge will then sign the order thus making it official. This is where the plan administrator can get going with the actual division of the retirement plan. Before then, the plan administrator will simply review the proposed language and give you feedback.
What information should you begin to collect to draft a domestic relations order?
As with anything else throughout the life of your divorce case, you need to begin to collect information regarding the division of a retirement account sooner rather than later period if you can work on collecting this information before the start of your divorce you can save yourself some time and money. I say that you can save time because it is easier to go through the effort of collecting this information before you have a time-consuming divorce on your hands. You can also save yourself money because you can work on collecting this information yourself rather than relying upon your attorney and their staff to assist you.
A lot of the information that will be required for you to provide to the plan administrator and your attorney is straightforward. The name of your spouse who has the retirement plan is probably the first thing that you will need to provide. You will also need to provide to the plan administrator your name. Your last known addresses, your Social Security numbers, and the percentage of the plan or a specific dollar amount that is payable to you in the divorce. Finally, the number of payments or the length of time that this money is supposed to be paid out needs to be provided to the plan administrator.
Keep in mind that if you follow the instructions of the plan administrator you can put yourself in a position where you would be able to have the plan divided in a way that corresponds to your final decree of divorce. I cannot emphasize enough how important it is for you and your attorney to stay in touch with the plan administrator throughout the life of your case. Contacting the plan administrator, the day before you submit the qualified domestic relations order to a judge is not wise. Rather, it is smart to keep this person in the loop of your case as much as possible so that you can learn what is acceptable and unacceptable language as far as the domestic relations order is concerned.
Having the assistance of an attorney to help you complete the qualified domestic relations order can be a major advantage for you and your family moving forward. While it is true that certain forms can be obtained through the Internet to help you learn where to begin in drafting this document, these documents give you little guidance on how to draft a domestic relations order for your specific circumstances in the plan that is relevant to your life.
From my perspective, one of the major things to take note of is that a qualified domestic relations order can be thrown back by the plan administrator for even small mistakes. Each plant seems to have small quirks that require individualized attention consideration. If you or your attorney for that matter, try to rush through the drafting of this document it can cost you a lot of time and money. What you want to accomplish in this situation there's two get the qualified domestic relations order drafted correctly the first time and with as little in the way of delays as possible.
Finally, your attorney cannot change the timeline under which you and your ex-spouse collect the retirement benefits. The retirement plan will have A specific timeline and requirements when it comes to distributing money to you and your spouse. Depending upon your age you may be able to receive money under the plan as soon as your divorce case is over if your spouse is already retired. This should motivate you to get your qualified domestic relations order drafted in completed as soon as possible. If you are younger, the qualified domestic relations order will be kept on file, and you will begin to receive payments whenever your spouse begins to receive theirs at retirement age.
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