The benefits of a QDRO during your divorce

Just posted this new article to my website:

A qualified domestic relations order can help people avoid one of the many common financial mistakes when going through a divorce.

Executive hands indicating where to sign contractMost people in Colorado who have gotten a divorce would agree that the process can be not only emotionally grueling but financially difficult as well. There are many things that make this a reality of the process yet there are some things people can do to protect themselves against some financial losses. Using a qualified domestic relations order when splitting a 401K or other employer-sponsored retirement plan is one of those things.

What is a qualified domestic relations order?

As explained by USA Today, a QDRO is a court order that makes it legally possible for one spouse to receive money directly from the other spouse’s 401K account. These accounts are set up in one person’s name only and that is generally the only person who can take money from them but the QDRO expands that for specific domestic situations such as a property division settlement during a divorce.

Why do I need a QDRO?

If a plan owner withdraws money from a 401K for purposes other than retirement, they may be forced to pay not only income tax on the distribution but also early withdrawal fees. Between the taxes and the fees, a large sum of the savings can be eaten up.

According to the United States Department of Labor, the QDRO bypasses the early withdrawal fees altogether. In addition, because the money is paid to a spouse, the account owner is no longer liable for any taxes. The spouse who receives the money may also be able to avoid the taxes when the money is received by reinvesting it into another retirement fund.

Are there other uses for a QDRO?

In addition to helping couples preserve more of their savings when splitting retirement funds, a qualified domestic relations order has other uses as well. If one spouse is ordered to make child support payments or spousal support payments, a QDRO can allow them to tap into their 401K funds to satisfy these obligations .

If money is taken to pay spousal support, it is once again paid directly to the spouse and the penalty and taxation is handled just as with a property division settlement. If money is taken to pay child support, it can be paid directly to the child or dependent or to a named guardian. However, in this situation it is the plan owner who retain tax responsibility. This is consistent with how taxes for child support payments are handled in general.

How do I know if I need a QDRO?

Anyone who is getting divorced in Colorado should talk with an attorney. Getting help to identify when things like a QDRO are needed is just one of the benefits of working with an experienced professional.

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I Just Want to Ride…

Motorcycle Arlo Guthrie wrote the Motorcycle Song (The Significance of the Pickle) in 1967 as part of the counter-revolution then sweeping the country. Son of folk musician Woodie Guthrie, Arlo Guthrie’s best known work is Alice’s Restaurant Massacree. The chorus to the Motorcycle Song is as follows:

I don’t want a pickle

Just want to ride on my motorcycle

And I don’t want a tickle

‘Cause I’d rather ride on my motorcycle

And I don’t want to die

I just want to ride on my motorcy – cle.  Continue reading

“Burning Down the House”

Burning house I’m a connections person; I don’t have many original ideas, but I like to think I have a knack for seeing the link between what might be seemingly disparate ideas. So, I’m listening to the radio (which I rarely do), and on comes Burning Down the House by the Talking Heads. Released in 1983 this was part of the group’s fifth album, Speaking in Tongues. For those of you not in the know, speaking in tongues is known as Glossolalia which is a phenomenon in which people appear to speak in languages unknown to them.  Part of the lyrics are:  Continue reading

Medicaid – Please Lend Your Voice

helping handToday there is no personal story, no witty reference to any modern media.  I am asking for your help in determining the future of Medicaid. If you, or someone you know or love, is not currently affected by Medicaid it is almost certain that you will be at some point in your life.  Please see the below message, taken from an alert from NAELA (National Academy of Elder Law Attorneys, Inc.):
Continue reading

“Ride Away, Ride Away”

Cowboy silhouette (see others in my portfolio/lghtbox)  I cannot resist another classic film reference, and if you have not seen “The Searchers,” you need to. John Wayne stars in this 1956 John Ford classic which also features a cast of John Ford regulars. Better yet, the movie has a great theme song sung by the “Sons of the Pioneers:”

 

What makes a man to wander

What makes a man to roam?

What makes a man leave bed and board

And turn his back on home?

Ride away (Ride away), ride away (ride away), ride away   Continue reading

“Row well, and live”

Ben-Hur_

© 1959 Warner Bros.

I love this line from the movie, Ben-Hur, and in fact, I often quote it to my employees, but I am not really the terrible employer this line might make me out to be! However, sometimes, I consult with employers who often think their workers are their servants, and the employers seek to craft employment agreements which go beyond the mark. Employers often include provisions in their employment agreements that seek to prohibit employees from working in similar businesses or locations once they leave. Commonly known as “non-competes” or “non-competition agreements” these provisions often create issues between employers and their former workers.  Continue reading

D-Day, The 6th of June

Monument Juno Beach Today marks the 73d anniversary of Operation Overlord which was the invasion of Normandy that helped lead to the ultimate defeat of Nazi Germany. The veterans we have left from this war are all in their nineties, with a few exceptions, and within another decade they will all be gone. What few know is the Supreme Allied Commander, General Dwight D. Eisenhower, had some doubts as to whether the invasion would succeed. And while 73 years later this fear may seem unfounded, we must remember the Allies had suffered a significant defeat at Dieppe in which the Germans repulsed with heavy losses a raid against the French coast. Accordingly, General Eisenhower penned the following in the event the Allied landings failed:  Continue reading