Qualified Domestic Relations Order (QDRO) Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Qualified Domestic Relations Order (QDRO), written in plain English, along with examples of how it is used.
What is Qualified Domestic Relations Order (QDRO)?
Qualified Domestic Relations Order is the order issued by a court directing to pay child support or alimony by apportioning money from the pension plan or retirement benefits of the guardian, such that the money goes directly to the child’s support.
History and Meaning of Qualified Domestic Relations Order (QDRO)
A Qualified Domestic Relations Order (QDRO) is a legal order issued by a court that assigns a portion of the eligible retirement account balance of one spouse to the other spouse as part of a divorce settlement. The purpose of a QDRO is to ensure that each spouse receives their fair share of a retirement plan or pension benefits.
Congress authorized the creation of QDROs in 1984 through the Retirement Equity Act. Before this, retirement benefits were treated as personal property of the employee, and dividing them up in case of divorce was difficult. This act allowed QDROs to differentiate between retirees and ex-spouses receiving retirement payouts, and allowed the retirement plan administrator to distribute the retirement benefits directly to the former spouse named in the order.
Examples of Qualified Domestic Relations Order (QDRO)
Here are some examples of QDROs in practice:
A couple divorces and the husband has a 401(k) plan worth $500,000. A QDRO is issued, stating that the wife is entitled to 50% of the account balance as part of the divorce settlement. This means that $250,000 from the husband's 401(k) will be transferred directly to the wife's retirement account.
A couple divorces and the husband has a pension plan through his employer. The QDRO states that the wife is entitled to receive a portion of the pension benefits that the husband would have received if they stayed married. This means that the wife will receive payouts from the husband's pension plan after he retires.
Legal Terms Similar to Qualified Domestic Relations Order (QDRO)
Here are some related legal terms that are commonly used in QDRO cases:
Domestic Relations Order (DRO): Similar to a QDRO, but not specifically for retirement plans. A DRO can allocate funds from a variety of sources, such as alimony or child support payments.
Separate Property: This refers to any property or assets that are owned by one spouse alone, and are not considered part of the marital estate. Separate property typically includes assets that were acquired by one spouse before the marriage or that were given as a specific gift or inheritance.
Community Property: This is any property or assets acquired by either spouse during the marriage. In some states, divorce settlements may divide community property equally between the spouses.