Don't let the divorce decree be vague on the issue of a 401(k) or pension fund. Be sure it is as specific as possible. It can address issues such as formula to divide the fund (lump sum, percentage, etc.), whether you are entitled to interest or earnings, whether the monthly amount (for a pension) is linked to your life or that of your ex-spouse, whether you are responsible for a loan that has been taken against the balance, and so forth. The more issues that you address in the divorce decree, the easier it is to prepare the QDRO. Looking at these issues during the divorce proceeding also gives you the chance to better use the retirement fund to negotiate a settlement. It may be simpler to transfer other marital assets than to divide the fund; or, a lump sum from a 401(k) may be a way to equalize the division of marital property.
Don't Wait to File the QDRO
It is easy to forget, or put off, preparing the QDRO, because retirement may be far in the future. Some divorce attorneys may not include the QDRO in their services. It is important to get this done sooner rather than later. As time passes, the funds may disappear, people may die, or accounts may change. Also, give yourself some closure - you don't want to revisit divorce-related issues 10 years or more after the fact. As an example, if you are entitled to 50% of a 401(k), but you wait several years before preparing the QDRO that gets the money to you, your ex-spouse may forget that part of the money is yours and get a loan or distribution. The plan may fail and lose money in the market. Even though you are still entitled to the funds years later, if they have disappeared for any reason, a QDRO wouldn't be worth the paper it is written on. Much better to get it all taken care of at the time of divorce.
Gather the Appropriate Information
Be sure to get all the information you need about your ex-spouse's retirement plans (and provide information about your plans to him or her). To draft a QDRO, an attorney would need 1) the participant's name, 2) the participant's social security number and birth date, 3) the participant's current mailing address, 4) the exact name of the plan, 5) the contact information for the plan administrator (or for the company retirement department), 6) the summary plan description from the plan administrator, 7) a specific formula for dividing the fund, 8) issues such as interest and earnings, loans, payment timing, etc. need to be raised and addressed. Your attorney can guide you on what other information is needed. But as a general rule, more information is better.
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