3 benefits of creating a QDRO as part of your gray divorce

On Behalf of | Jan 13, 2022 | Divorce, Property And Asset Division

Splitting retirement accounts in a divorce is a crucial step, especially for those who have spent decades together and are close to retirement age. Creating a Qualified Domestic Relations Order (QDRO) is often part of the process of splitting retirement accounts in gray divorces. 

When you divorce, there are numerous benefits to using a QDRO to divide your retirement account. Here are some of them: 

You avoid taxes

Many retirement accounts offer deferred taxation as an incentive. By putting money aside, when you earn a good income, you reduce the taxes you pay while working. You can then pay taxes on those savings as you make withdrawals. If you take money from the account before you reach retirement age, there will be penalties and taxes. Dividing an account using a QDRO as part of a divorce eliminates the need for those taxes. 

You don’t have to wait years for your share

There are other methods for splitting retirement benefits and pensions. These methods might include having one spouse pay support to the other or dividing the benefits when someone has access to them later in life. The issue with this approach is that one spouse might diminish the account or possibly die, complicating or reducing the ex-spouse’s claim. 

A professional manages the entire process

When you use a QDRO to divide a retirement account, a lawyer will draft the QDRO. Legal professionals from the court will review it, and then a financial professional who handles the relevant account will be the one to divide the retirement savings. Relying on professionals for what can be a complex process minimizes the risk of mistakes that could trigger taxes and other financial penalties. 

Learning more about the unique concerns of dividing retirement accounts can help you plan for your future.