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To assure long-term security in divorce, remember the QDRO

If you were to receive a note that started, "GAS 2U," would you be offended or take it in stride? The answer depends on how comfortable you are with acronym writing. For the record, the phrase above translates as, Greetings and Salutations to you.

Such language contractions are common in everyday activity. The practice of law is no exception. One that is particularly pertinent to Ohio family law is QDRO - pronounced KWAH-droh. It stands for Qualified Domestic Relations Order. Any person going through the divorce process - but especially individuals concerned with long-term security - needs to be familiar with what a QDRO is and what it does

QDRO in brief

Most readers likely know that division of property is a key to finalizing a divorce. All physical assets, such as houses, cars, furniture and the like, need to be valued in order to arrive at equitable division. Debts get the same treatment. Also subject to division are all funds that either spouse might hold in retirement accounts - this includes benefits residing in private pension or retirement accounts.

What readers might not appreciate is that access to such accounts is heavily restricted by federal law. Any early withdrawal from a tax-deferred status triggers a taxable event. And the person who receives those funds bears the liability, which can be significant.

A QDRO acknowledges that a couple's divorce is an extraordinary circumstance. Properly drafted, a QDRO identifies that there is an alternate recipient besides the beneficiary eligible for some of the funds for support of the spouse or a child. Once the document is accepted by the court as part of the divorce decree, it effectively is an order allowing access to the alternate. 

Once that is granted, you have several options on what to do next. You could take the funds as a lump sum, pay any tax obligation, and put the remainder to use. If circumstances allow, you might prefer to roll the money over to your own qualified account without taking a tax hit. Alternatively, circumstances might allow you to leave the money in the existing plan, earning interest, until you are ready to use it or reinvest it.

What action is best for you depends on your unique situation. By speaking with a skilled attorney, you can know all your options and find the one that fits your needs and desires. 

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