What Is a QDRO in a Divorce?

Melissa Phipps is a retirement planning and investing expert who has covered those topics for more than 20 years as a writer, editor, and author. Her writing has appeared in Worth, Financial Planning, Financial Advisor, The American Lawyer, Institutional Investor, and many other publications.

A qualified domestic relations order (QDRO) assigns interest in a retirement plan to a former spouse or other dependent in the event of divorce.

Key Takeaways

• A QDRO divides assets in a retirement account in the event of a divorce.
• In general, a court must order a QDRO.
• Money withdrawn under a QDRO is not subject to a typical 10% early-withdrawal penalty.
• Payees have many options for how they can receive their share of assets under a QDRO.

How Does a QDRO in a Divorce Work?

A QDRO is drafted to name an alternate payee for the assets within a retirement account. It allows more than one person to receive benefits from a retirement plan. A QDRO may require assigning a portion of a plan's assets to a second payee, which can be done to meet family support or marital property obligations. The payment terms depend on the plan and details of the QDRO.

Note

The alternate payee must be a spouse, ex-spouse, child, or other dependent. Other alternate payees will not be considered.

Your plan administrator may offer a standard form used by the plan. This will often be free, and easy to fill out on your own.

You don't have to use one of these model forms to obtain QDRO status. A lawyer also can draft a QDRO on your behalf. That may be worth the added expense. It can provide peace of mind that the order will be done the right way.

The form drawn up must include:

• The names and mailing addresses of the plan participant and the alternate payee
• The name of each plan under the QDRO
• The dollar value or percentage of the plan assets going to the alternate payee
• The number of payments or time period included in the order

To count as a QDRO, an order must:

• Be a judgment, decree, or order that a state agency issues, or a property settlement that a state approves.
• Comply with state domestic relations law and the Employee Retirement Income Security Act (ERISA).
• Relate to child support, alimony, or marital property rights that would benefit a present or former spouse, former child, or former dependent of the person holding the retirement plan.

Note

The QDRO stipulates the portion of the retirement plan to be segregated and held in a separate account on behalf of the former spouse. The time frame or commencement date for payment to the alternate payee is included in the QDRO.

There is no one-size-fits-all approach to dividing assets through a QDRO. It all depends on the type of retirement plan, the type of benefits afforded under the plan, and the reasons for the division.

As an alternate payee, you may be entitled to some or all of the participant's benefits under a retirement plan. One common approach splits benefits into two separate parts. The time and form of the payment that the payee chooses may be different from what the plan participant chooses.

Example of a QDRO

QDROs carry the same weight as child support, alimony, or any other property granted to each spouse in a divorce. For example, a state court orders a QDRO for an individual who owes back child-support payments to their former spouse. The QDRO outlines the participants involved in the divorce, their names, and their addresses. The QDRO also lists the name of the retirement or pension plan and the administrator of the plan, and the administrator makes the agreed-upon distribution(s).

Types of Distributions Under a QDRO

A QDRO may afford you one or more options for how you take your portion of the distribution as the payee.

Lump Sum

A lump sum would require paying taxes on the distribution right away. If the payee is a child or another dependent, though, the plan participant gets taxed instead of the payee.

Annuity

You also can take the money as an annuity and receive your portion in installments. That can help spread out your tax burden.

Note

No matter your age, money you withdraw from a retirement plan under a QDRO is not subject to the typical 10% early withdrawal penalty fee. Most money that you take from a retirement plan before age 59 1/2 is considered an early withdrawal, which would be subject to a 10% penalty. If you withdraw assets from a retirement plan that is not under a QDRO, you will have to pay the penalty, in most cases.

IRA

You also can move the money into a rollover IRA. That would keep the assets tax-deferred and completely under your control.

Benefits of QDROs

One of the main benefits of a QDRO is that it makes the transfer of assets much smoother. Both spouses know the amount of assets that will be transferred. Additionally, the spouse receiving the QDRO can walk away from the divorce knowing they've got money saved up for retirement.

Additionally, the spouse who transfers the retirement funds from a retirement account doesn't have to pay a penalty. QDRO transfers are excluded from the 10% penalty you'd normally have to pay for an early withdrawal. The receiving spouse doesn't have to pay taxes on the transfer, either, as long as the money goes into a qualified plan (IRA or 401(k), for example).

QDRO Limitations

If funds within a retirement account are already part of another QDRO, you can't access them through a QDRO. This could become an issue if your spouse has a QDRO in place from a previous marriage.

Also, if children or dependents aren't included in a retirement plan, then they can't be added to the QDRO. Additionally, any funds added to a retirement account before you were married aren't eligible for the QDRO.

Frequently Asked Questions (FAQs)

What is the purpose of a QDRO?

When a couple is getting divorced, a QDRO (qualified domestic relations order) provides a way to split up retirement assets.

How long does it take to get your money from a QDRO?

There is no set time frame for how long it takes to get your money from a QDRO. The timeframe depends on how long it takes to draft and obtain the QDRO. Once the QDRO is obtained, fund can be moved quickly, depending on the type of retirement account involved.

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Department of Labor. "QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders." Pages 3, 8.
2. Department of Labor. "QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders." Page 6.
3. Department of Labor. "FAQs About Qualified Domestic Relations Orders." Page 2.
4. Department of Labor. "FAQs About Qualified Domestic Relations Orders." Page 1.
5. IRS. "Retirement Topics—QDRO—Qualified Domestic Relations Order."
6. Fields and Dennis, Attorneys at Law. "Distribution Options for Retirement Assets Settled in Divorce."
7. ABA Retirement Funds. "QDROs."
8. IRS. "Retirement Topics—Exceptions to Tax on Early Distributions."
9. IRS. "Retirement Topics—Exceptions to Tax on Early Distributions."
10. Anner Law Offices. "Qualified Domestic Relations Orders (QDRO)."
11. Law Offices of Amy L. Gervich. "Benefits and Limitations of QDROs."
12. Dorothea G. Aguero, Attorney at Law. "Limitations and Difficulties With QDROs."
13. QDRO Solutions. "Frequently Asked Questions (FAQ's) About QDROs."

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