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Do you need a QDRO when dividing divorce property?

Although a divorce may signify the end of a marital relationship, there's no reason that long-term planning should be set aside. Indeed, our Texas law firm works hard not only to protect our clients' rights during a divorce, but to help them take affirmative steps for putting their post-divorce finances in order

A qualified domestic relations order is one way to keep the big picture in mind during a divorce proceeding. A QDRO, which must be signed by a judge, instructs how retirement assets will be divided between the spouses. Notably, the payment does not have to be immediate or in a lump sum. A QDRO can used to pay child support or alimony. A QDRO may also be rolled over to another tax-deferred account. Since Texas is a community property state, the only condition is that the division be an equal, 50-50 split.

In Texas, the court will not finalize the divorce until all property in the marriage has been classified as community or separate property. Examples of separate property might include inheritances or other assets that an individual owned before the marriage. Any assets acquired during the marriage, in contrast, would generally be considered part of the marital estate.

When finalizing the terms of the QDRO, issues may arise when a spouse owned certain retirement assets before the marriage. To the extent the spouse asserts that all or a majority of the retirement funds are separate, rather than community property, a forensic account may be needed to value the amount the funds increased during the marriage. Calculations may also get complicated when a spouse agrees to give up his or her share of future payments from a retirement asset, such as a pension.

Our attorneys know how to work with financial experts to ensure that taxes, penalties and future valuations amount to a fair share for our clients. We understand that property division negotiations in a divorce can be crucial to a client's well-being.

Source: Yahoo, "QDRO: Critical Letters in a Divorce Case," Andrew McNair, March 24, 2017

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