A QDRO (pronounced quadro) is a Qualified Domestic Relations Order. A QDRO is used to divide certain types of financial accounts, such as retirement 401K and IRA. This is necessary because these financial accounts often have restrictions for withdrawing funds, unlike a cash savings account, such as major tax consequences.
Remember that when a couple divorces, all of the assets and debts either party owned before or during the marriage must divided equally (there are some exceptions for an unequal division). This includes investment accounts such as brokerage accounts, IRAs, 401Ks, cash, real estate, tangible property (furniture or collectibles), etc. Yes, even if an IRA or 401K is solely funded by you from your income, it is still considered marital property in Indiana that must be divided.
A QDRO is a tool that is used after a divorce has been granted and the marital estate has been divided. If an investment account, such as a retirement account, is divided between the two (former) spouses, a QDRO must be filed with the court for approval, and sent to the institution holding the investment with instructions to transfer some of the funds to a new investment account under the other spouses name (divide it). This tool allows the funds to be transferred without penalty for early withdrawals.
Generally a QDRO is drafted by your attorney after the final decree of divorce is issued. Usually this occurs shortly thereafter, but a recent case in Indiana (Ryan v. Janovsky) held that a Wife, who waited 20 years to file a QDRO, was still allowed to do so, and filing of same is not time barred (though this may not be the best option for you).
We hope that this blog post has been helpful. Ciyou & Dixon, P.C. practices throughout the state of Indiana. This blog post was written by attorney, Lori Schmeltzer.