Divorce can mean months, or even years, of hammering out settlement terms. The process can be both exhaustive and exhausting; but, in the end, you and your ex will have a formal agreement. Once it’s signed by both parties and filed with the court, your divorce will be official, and in an ideal world, each party will honor the terms of the settlement . . . and life will go on accordingly.
However, if you’re negotiating an agreement that will include spousal and/or child support, there’s something critically important you need to know: Many ex-husbands don’t honor the financial terms of their divorce settlements. U.S. Census data show the sad truth: less than half of parents get the full amount of child support. And through my experience as a Divorce Financial Strategist™, I can tell you that alimony, too, is often difficult to collect. Divorce attorneys see it time and again, and they have file cabinets full of paperwork from trying to chase down delinquent payments for their clients.
Fortunately, there’s a tool that’s becoming increasingly popular and effective against this troublesome problem: the Qualified Domestic Relations Order (QDRO).
What is a QDRO?
A QDRO is a court order concerning retirement plan benefits, and it can be used to enforce spousal support, or even for collection of past due support payments. Simply put, it allows for an alternate payee to receive some or all of the benefits payable to a participant in a retirement plan. Note: Applicable retirement plans include pension plans, 401Ks, 403Bs and other Employee Retirement Income Security Act (ERISA)-governed plans . . . but not IRAs.
So, a judge can use a QDRO to ensure equitable division of a spouse’s retirement plan benefits as part of a settlement. In other words, a judge can use a QDRO to order that you receive part of your husband’s retirement benefits, and because federal law allows a retirement plan to be used as a source of funds for child support and alimony, QDROs can also be used to enforce spousal support, or even for collection of past due support payments.