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Complete the Retirement Transfer Process Right After Your Divorce

I have written before about the need to get any Qualified Domestic Relations Orders (QDRO) done quickly after the divorce is completed. A recent Michigan case invalidated a QDRO when wife waited until after her former husband’s death to submit the QDRO.

In that case the QDRO attempted to divide the former husband’s pension.  The party complaining about the late submission was the former husband’s employer who wanted to return the proceeds of the pension that remained unused to the plan.  There were no other surviving beneficiaries who were qualified to receive benefits.  In that case, former wife’s delay cost her the loss of significant benefits.

The difficulties in getting QDRO’s done are due to a number of reasons.

1) Some people chose to represent themselves and are not aware that retirement plans can be divided pursuant to a divorce.

2) The process is complicated.  Some retirement plans claim that you can do the QDRO’s yourself.  However, those of my clients who have tried this, have called me to complete the process.

3)  The language used for QDRO’s is based on employment law and is difficult for people who don’t work in this area to understand.

4) Because QDRO’s represent an exception to the Internal Revenue Code, there are strict rules for processing the transfer of the funds.  The language in the QDRO’s has to be precise.

5) People get frustrated with the complexity and the amount of time involved in getting QDRO’s done properly.

6) Some lawyers who represent divorcing clients do not offer having QDRO’s drafted as part of the divorce process.

7) Some clients do not understand that having the retirement funds transferred involves another process than getting the divorce.

In our firm, we do not personally draft QDRO’s since the documents are governed by employment law.  We limit our practice to divorce law and estate planning.  However, we routinely refer the drafting to professionals who have the employment law knowledge and experience.  We help our clients assemble the needed documentation and submit this to the preparer and have the order entered by the Court after everyone signs the QDRO.  We then handle having them processed until they are accepted by the plan administrator.  If there are problems during this procedure, we make sure that the QDRO is redrafted to meet with the plan requirements, answer the client’s questions and arrange to have any difficulties addressed.

Under Michigan law, retirement plans are part of the equitable distribution of marital assets.  Do not lose your benefits by failing to follow up on having the necessary QDRO’s drafted and processed in your case in a timely fashion.

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