Dividing marital assets between divorcing parties is one of the most common tasks that a divorce court in Maryland will be called upon to do. Judges are entrusted with dividing marital property fairly and equitably in light of the specific circumstances of each divorcing couple.
This duty to divide property includes both tangible and intangible assets. For example, one spouse might get the marital home while another will get the shared car. Similarly, if necessary, a court will divide the assets held in bank accounts, investment accounts, and even retirement accounts.
But dividing a retirement account is not as simple as one spouse handing the keys of a car or home over to the other spouse. Instead, the court may issue a qualified domestic relations order, or QDRO, directing that a portion of one spouse’s retirement plan be paid to the other spouse.
To be effective, such an order must be filed with the court and then delivered to the retirement plan administrator. These critical steps can be forgotten in the messiness of a divorce. While you generally can file a QDRO months or even years after a divorce, it’s best to do so sooner rather than later.
Retirement Accounts and Marital Property
You may feel a sense of ownership over your retirement account. You have likely built your account from your contributions alone, and you expect it to provide you with an income that will allow you to enjoy your golden years. The prospect of dividing your retirement account at the time of divorce might seem unfair.
Moreover, you may have started your retirement account before you got married. The courts take this into account; any contributions you made to the account before your marriage may be considered your separate property.
However, the law recognizes that increases or contributions made to your retirement account during your marriage may be marital property, regardless of who made the contributions.
Basics of Qualified Domestic Relations Orders
A court may order that a retirement account be divided as part of a divorce decree, but this does not automatically result in you receiving such a portion. A qualified domestic relations order is simply an order entered by a court or other appropriate authority recognizing that you have an interest in a portion of the retirement account.
Once ordered, a QDRO can be filed and presented to the court and retirement plan administrator at any time. There are no time limitations following a court order that renders a subsequent QDRO inapplicable or ineffective.
For example, suppose that you were awarded a 25% interest in your spouse’s retirement account in 2020. In that case, you could still file a QDRO in 2025.
Why You Should Not Delay Filing a QDRO
You could file a QDRO any time after you are granted an interest in a retirement account by the court, but waiting is not a good idea. The longer the time between when the court awards you your interest in the retirement account and when you file the QDRO, the greater the risk that the plan’s owner may take some action that diminishes its value.
The retirement plan administrator is generally not required to take any action in recognizing your share of the account until it receives a QDRO, and retroactively enforcing a QDRO can be challenging.
For instance, suppose that you were awarded your interest in the account in 2020 but did not file a QDRO until 2025. You may face an uphill battle to receive benefits retroactive to when the court ordered the QDRO depending on the terms of the retirement plan and the wording in your Judgment of Absolute Divorce or Marital Settlement Agreement.
Before retirement plan administrators receive this document, your spouse could retire or pass away, borrow against the account, or take any number of actions that would affect the account’s value. Any such action may, by extension, impact the value of the share you would receive.
QDROs Can Be Complicated, So Get Knowledgeable Help
When it comes to dividing intangible assets like retirement accounts and protecting your interests in them, do not risk your rights. Enlist the help of the skilled Maryland QDRO attorneys at Blattner Family Law Group in drafting and filing a qualified domestic relations order. The sooner you retain our services, the better protected you will be.