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What is a qualified domestic relations order (QDRO)?

The year you turn 60, your spouse comes to you and asks for a divorce. It's your second marriage; you got married when you were 40. You felt like things were not exactly going well for the last few years, so you are not shocked by the request.

However, you do wonder if things are going to play out differently the second time around. One major issue that you want to keep in mind is your own looming retirement. Is this going to change when you can retire? What legal obligations do you have? What does it mean for the division of assets?

You start asking your friends, and someone mentions that you may need to use a QDRO. They can't really explain what it means or how it works, but they heard through the grapevine that it's very important in gray divorces. So, what could it mean for you?

Retirement planning

First off, QDRO stands for qualified domestic relations order. It is a legal order that you may use during your divorce. The court can issue it to determine how you and your ex have to split up your assets.

What it focuses on is paying the spouse without a retirement fund some of the value of the other person's fund. This could be a pension plan or a retirement fund sponsored by the employer.

For instance, perhaps you have a retirement plan. You have worked at the same place for 30 years. You have been building up your fund that entire time, and you assume that it will let you retire comfortably in just a few years. Your hope is to retire at 65.

However, your spouse has no plan at all. They didn't work. They planned on using your funds and getting financial support that way. With the divorce, they know it won't happen.

The QDRO states how much of your pension plan or retirement fund needs to go to your spouse. They may have a right to it just like any other marital asset that you own.

How is it divided?

Individual cases can differ a bit, but it typically just divides the money earned during the marriage. Say you retire at 65. That means you worked at the company for 35 years. You worked there for 10 years before the marriage, though, and another five years after the marriage. You don't have to split the whole plan. You typically just have to give your spouse 50% of the money earned in those 20 years. Since that's a little more than 50% of the time you worked there, you end up paying your spouse a bit over 25% of the total.

Again, every case is different. Make sure you know your rights and what steps to take.

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