QDROs

After an adversarial and lengthy divorce, with mounting legal fees, many are tempted to take short cuts in the days that follow.  One shortcut that can result in a costly result is trying to handle the transfer of retirement funds, which often require a Qualified Domestic Relations Order (QDRO).  In general, this is an area of law most family law attorneys pass off to a financial expert as it can be complicated depending on the type of retirement accounts involved and the specifics of the the agreement.

Let me share with you two stories that will highlight the importance of letting an expert handle this final step in the divorce process.

First, the a portion of the funds in Husband's IRA was to be transferred to Wife.  The plan administrator of the IRA had very specific and unique requirements to complete this transfer which was further complicated by the financial expert receiving incorrect information from the plan administrator.  Wife became anxious with the delays in completing this transfer, as she was watching all the missed opportunities in the market, that she made her own calls to the plan administrator to "help speed up the process".  What happened instead was that the plan administrator stopped all work, refusing to try and figure out whether they should listen to Wife or the financial expert.  We eventually got it resolved but the process took much longer than it should have.

In this second story, Husband had various retirement accounts including 401(k) and IRA accounts from which Wife was to receive a portion of funds.  Husband's attorney was responsible for finding out which transfers could be done internally and initiating the process with the financial expert for the transfers that could not be handled internally and would need a QDRO or other similar documents.  Wife's attorney followed up after hearing nothing from Husband's attorney.  Wife contacted her attorney stating she was handling this on her own.  She asked that her attorney do no further work on this matter.

A year later Wife contacted her attorney, stating that funds from two of the accounts had finally been transferred but two accounts still remained.  Wife argued she should be entitled to all gains on the account she was awarded in its entirety and gains on the fixed dollar amount she was to receive from the final account.  Husband argued that Wife should receive the amount she would have received in the months following the divorce as if the transfers had been completed as anticipated based on the calculations to equalize property division.  There had been some delays on Husband's part but Wife had also refused to use her attorney to see the process to the end, encouraging completion of the process in timely manner.  So Wife found herself in the position, a year and a half after the divorce, of the process still not being complete and the loss of any gains she may have earned in the months since the final hearing.

Had the parties let their attorneys handle the two examples above, the transfers would have been complete in a reasonable amount of time, with the parties having the ability to appreciate the gains of their retirement investments.