When Is a QDRO Used in a Wisconsin Divorce?

 Posted on June 03, 2021 in Divorce

Couples who choose to legally dissolve their marriage through divorce will need to address many different legal, financial, and practical issues. The division of marital property is one of the key issues that will need to be resolved, and all of the assets and debts that a couple acquired while married will need to be divided as fairly and equitably as possible. While determining how to divide some assets can be a straightforward process, complex financial issues may arise when addressing certain types of assets, including retirement accounts and pension benefits. When dividing these assets, a couple will usually want to use a Qualified Domestic Relations Order, or QDRO.

Using a QDRO to Divide Retirement Savings and Benefits

Retirement benefits usually fall into one of two categories: defined contribution plans and defined benefit plans. Defined contribution plans usually take the form of retirement savings accounts, such as a 401(k), and the value of these assets is usually easy to determine based on the current balance of the account. Defined benefit plans such as pensions can be more difficult to value, since the amount that will be paid when a person begins receiving benefits usually will not be known until a person retires. A QDRO can be used to divide both of these types of assets between divorcing spouses.

For 401(k) accounts and similar assets, a QDRO will specify that a certain amount of the funds in an account will be withdrawn and paid to someone other than the account holder. By creating this type of order and sending it to the retirement plan administrator, funds can be transferred from an account without being required to pay penalties for withdrawal before reaching the age of retirement. If the other spouse rolls the funds over into their own retirement account, they will not be required to pay taxes on the amount that was withdrawn.

For pension plans, the actual amount of benefits that a person’s ex-spouse will receive will most likely not be known at the time of the couple’s divorce. Instead of specifying a monetary amount, a QDRO will state that a certain percentage of the pension benefits will be paid to the person’s ex-spouse once the person retires and begins receiving payments. This percentage will be based on the amount of time the couple was married while the person was earning pension benefits. 

Contact Our Milwaukee, WI QDRO Attorneys

Determining how to divide retirement assets can often be a complex task, and a variety of other financial factors will also need to be considered during the divorce process. The attorneys of Gimbel, Reilly, Guerin & Brown, LLP can provide you with legal representation as you work to complete your divorce, and we will advise you of the best ways you can protect your rights and your financial interests. To get the legal help you need throughout the divorce process, contact our Milwaukee property division lawyers at 414-271-1440 and set up a free consultation today.

Sources:

https://www.wisbar.org/newspublications/wisconsinlawyer/pages/article.aspx?Volume=85&Issue=6&ArticleID=2443

https://docs.legis.wisconsin.gov/statutes/statutes/767/vii