Qualified domestic relations orders demand thorough preparation and focus, the lack of which can undo intent. This is why more and more individuals are choosing to hire a qualified domestic relations order expert to review their documents before it is submitted to the plan administrator or the judge. Small mistakes made when your qualified domestic relations order is drafted could lead to problems down the road.
The presence of multiple retirement plans demands careful wording and the date of valuation of those plans is one thing, but the date of QDRO execution, which is typically 60 to 90 days, is another in terms of timing and accuracy. Accounting for gains and losses after the valuation date may be hard enough but made even harder yet if the dollar amount a spouse is to receive, say $40,000, exceeds the total of any plan. If the two of them together are $10,000 and $15,000 meaning they are too small to be taken into account for gain or loss.
Another mistake can be ignoring loans because a loan due can reduce a plan below the amount low enough that equal division violates the spouse share based on the original higher total. Furthermore, what about taking into account loan payments made in the interim as the QDRO is being drafted? This is why it is imperative to have as much information as possible when you are putting together the qualified domestic relations order. Having an accurate perception of the account as well as information about any money that has been withdrawn from the account can be crucial for your own success. Do not hesitate to get all of the details straight and hire a qualified domestic relations order expert to help you with this process.
The good news about planning with your retirement accounts subject to ERISA after a divorce is that if you engage someone who has experience in this field, they can all be easily avoided. Although some people do still face challenges because they have not hired an experienced qualified domestic relations order expert, you can skirt these problems by identifying someone to serve in this role sooner rather than later. Make sure you reach out to someone as soon as you believe that the division of one or more retirement plans will be a part of your divorce so that you can get all your questions answered and have a clear idea of what to expect next.