A big concern for divorcing couples dividing retirement assets is how to do so without incurring an income tax penalty as well as taxes for transfer of a retirement plan. To do this, couples will want to use a Qualified Domestic Relations Order or a “QDRO.” A QDRO is a court order signed by a Colorado District Court Judge. Without a QDRO, a transfer of retirement assets is taxable to the transferor; additionally, if the transferor is 59 ½ or younger, there is a 10 percent early withdrawal penalty added.
If you have submitted a QDRO to your retirement plan and decide you have changed your mind, it is impossible to reverse once it has been received and processed. The only way to have it changed is to have the courts issue an amendment to the original QDRO, although it would still be up to the administrator of the retirement plan to review the new plans and approve them.
Whether the QDRO can be amended or not generally depends on whether your divorce agreements are accurately reflected within the terms of the original QDRO. If a QDRO clearly goes against your divorce agreement, then that provides simple reasoning for why the QDRO needs modification. Otherwise, you will need to renegotiate with your ex-spouse in order to get the QDRO amended.
In many divorce cases, important issues related to QDROs are left unresolved during the divorce proceedings, or given less attention than they deserve. This makes the QDRO even more important in terms of protecting your rights to your property. This is why it is always important to have an attorney look carefully over your QDRO to ensure that your rights are being protected.
Exception: If your retirement funds are in simplified employee pensions (SEP) IRA assets or individual retirement accounts, a QDRO is not necessary.
The divorce attorneys at Divorce Matters are well-versed in matters of equitable division of marital property.