Hey there, welcome back! We’ve been talking about QDROs here in Michigan, which if you remember from our first article, is a court order that lets your spouse or kids benefit from your employee benefit plans. Or your ex spouse, which is why we’re talking about this, because it can have an impact on your divorce agreement!
We’ve already discussed exactly what a DRO and a QDRO are, and what counts as an employee benefit program here in Michigan. So let’s pick up where we left off with a look at why QDROs are so important in the event of a divorce.
Why is a QDRO important in a divorce?
This may seem like a strange question to some, but there are some people who don’t see how this court order could have any real bearing on their future after a divorce. The truth is, it can have a huge impact! Especially when you consider the fact that more and more these days, retirement benefits are becoming even more important than the family home when divorcing couples are dividing their assets.
Usually, a spouse has a right to half of the marital portion of the other spouse’s retirement benefit. (Which is NOT the same thing as half of the entire retirement benefit!). Confused? This just means that if you were making payments into your retirement account for ten years before you got married, and then for another ten years after your marriage until the divorce, your ex would only be entitled to part of the portion you paid on during the marriage.
How do QDROs get divided when you get divorced?
Federal law (ERISA) allows the courts to divide retirement benefits in a divorce. As long as the spouse receiving the benefits rolls the sum into their own retirement account, the division doesn’t have any immediate tax consequences.
So when a divorcing couple agree to divide retirement benefits, the court enters a Qualified Domestic Relations Order, which directs a plan administrator to set aside part of an individual’s retirement for a former spouse. (This sounds like a really simple process, but the truth is, it’s actually unpleasantly complex, and involves a lot of red tape and bureaucracy.) In fact, there are many attorneys who don’t do QDROs themselves because of the complexity.
Do you have questions about divorce in Michigan?
If you live in Michigan’s lower peninsula, and you’re considering divorce, call The Kronzek Firm at 866 766 5245. Our skilled and experienced family law attorneys can answer all your questions about dividing up your stuff, paying alimony, or figuring out custody. We’re available 24/7 to help you figure out what your next move should be, and get you ready for the next season in your journey.