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Q & A on dividing retirement in divorce

As a QDRO attorney in Illinois, I frequently work with divorce lawyers and family attorneys to create the orders needed for dividing retirement assets such as pensions plans and 401k accounts.

QLC recently asked some questions of Chicago divorce lawyer David Wolkowitz (see his website). People hoping to divide retirement assets might find his answers useful. This is what attorney David Wolkowitz (DW) answered:

Q: What’s the biggest problem in retirement division?

A: When people get divorced, they’re normally happy to get the process over with and move on with their life. Unfortunately, that can cause them to neglect the division of retirement assets like 401k accounts and pensions. People who don’t pay sufficient attention to dividing retirement accounts are at risk of losing money prolonging their divorces. It is a game of pay now or pay more later. Thus, the longer you wait, the more you may lose.

Q: When should a QDRO be entered?

A: When handling a divorce, I normally try to make sure the QDRO or other retirement division order is entered when the “prove-up” occurs. The prove-up is when a divorce in Illinois is finalized.

Leading up to the prove-up, both parties are ready to bring the case to a conclusion.

The problem with entering QDROs after a divorce is that people are tired of thinking about their divorce.

Also, entering a QDRO after an Illinois divorce has been finalized simply creates another trip to court, and that’s something clients normally pay lawyers to do. For example, I’ve had multiple clients who got divorced on their own or with a different lawyer, and there QDROs were not entered on the day they got divorced. Then when the QDRO was drafted, they disagreed about the language, and now they are fighting about the language of the QDRO. That’s a waste of time, and money. The best thing to do is try to agree on the language of the QDRO before a divorce is finalized, then to simply enter the QDRO when the divorce is finalized.

If clients really want to put their divorces behind them, I often recommended they get the QDRO entered simultaneously with the divorce judgment, instead of after.

Q: Can anyone prepare a QDRO in Illinois?

A: Amazingly, for some reason it’s common for non-lawyers to prepare QDROs. If you ask me, that’s crazy. For example, in the Chicago area, many divorce lawyers use non-lawyers to prepare their QDROs. Sometimes even out-of-state non-lawyers. Instead of trusting my clients finances to someone not qualified or licensed as a lawyer, I suggest my clients use a QDRO attorney in Illinois.

Q: Who can hire the QDRO lawyer?

A: When people get divorced in Illinois, there are several ways to handle getting the QDRO done.

Each party can have their own prepared, compare them, and then chose which one to use. Or, they can each prepare their own and have the court decide which one to use.

However, often one party will take the lead in having a QDRO prepared. There are several benefits to taking the lead in the preparation of a QDRO. First, the person who takes charge often gets to choose who will draft the QDRO. And that means choosing a competent person, instead of somebody who doesn’t know retirement plan law and is therefore not sufficiently qualified. Furthermore, the person controlling the drafting of the QDRO will have more control over the language of the QDRO – and that can have significant financial benefits.

Q: How familiar are clients with QDROs?

A: Many clients have heard of QDROs, but understandably, find them confusing. A QDRO is simply an acronym for a “qualified domestic relations order.” There are other special orders for dividing other retirement accounts, such as those from the the military or other federal government retirement benefits. But QDRO is the most widely used term. For Illinois retirement plans the term used is QILDRO.

QDROS enable retirement assets such as 401k accounts and pension plans to be divided as part of a divorce – without causing the account-holder to incur massive penalties for early withdrawal.

Q: What are some misconceptions about QDROs?

A: People getting divorced often do have misconceptions about QDROs.

For example, some people think it doesn’t matter who prepares a QDRO, because it’s just a form. But that’s not the case, QDROs are not a neutral document and it matters how it is tailored. Unlike some lawyers who use out-of-state non-lawyers to prepare QDROs (and self-proclaimed experts who do nothing more than fill in the blanks of model QDROs or other templates), I prefer to only use Illinois QDRO attorneys who will carefully customize the QDRO for my clients. I think it’s a much more reliable way to go for my clients. Also, I simply don’t trust non-lawyers to do lawyers’ work; they’re not licensed, and they aren’t qualified.

Another misconception is that people who want an uncontested divorce in Illinois cannot be dividing retirement assets. However, much to the contrary, dividing retirement assets such as a 401k account or pension benefits can actually help expedite an uncontested divorce in Illinois by allowing divorce people more options in dividing their assets. By the way, people that want a better understanding of an uncontested divorce in Illinois should check out this uncontested divorce article.

Q: Do divorce lawyers prepare QDROs, QILDROs?

A: Some do, but that doesn’t mean they should. After all, some so-called QDRO preparers don’t do a very good job either. Although it happens in the context of a divorce, preparing a QDRO does not really deal with divorce or family law. A QDRO is mostly a matter of retirement plan law.

In fact, most divorce divorce lawyers in Chicago do not prepare QDROs for their own clients, in my experience. The reason is that QDROs are specialized documents that can have a large financial impact. Also, attorneys who have knowledge of retirement plan law and specialize in QDROs  are far better prepared to navigate the many intricacies of dealing with the plan administrators and drafting orders that do what they are intended to do. It may be a red flag if a divorce attorney prepares QDROs for his or her clients as most of family attorneys do not have the necessary knowledge of retirement plan law, and experience working with retirement plans, to be able to do just as good of a job as a QDRO attorney would do.

 

 

 

About the author: Veronica Silva is a QDRO attorney and retirement pensions and accounts division lawyer with more than 10 years of experience dealing with retirement pensions and accounts split pursuant to divorce.

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