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Why a QDRO matters in a divorce

If you are getting divorced in Indiana and believe that you will need to split your 401K account or other employer-sponsored retirement fund with your spouse, you will want to learn about the qualified domestic relations order.

The U.S. Department of Labor explains that without a QDRO in place, you may be at risk of paying very high penalties and taxes when splitting your retirement fund in a divorce. The reason centers around who is authorized to receive money from your account and when payments may be made. Generally any money taken out of a 401K account by you for reasons other than retirement are subject to early withdrawal fees as well as income tax.

A QDRO lets your spouse receive money from your account directly, taking your liability for fees and taxes out of the equation altogether. Because the QDRO has been approved by your plan administrator, no fees need be assessed. If your spouse invests the money into another retirement fund, they may also be able to avoid the taxes at that time. In short, a qualified domestic relations order is a valuable tool by which you can keep as much of your hard-earned savings as possible during a time when every penny and every dollar counts.

If you would like to learn more about some of the considerations you should keep in mind when evaluating your property division settlement, please feel free to visit the qualified domestic relations order page of our Indiana divorce and family law website.

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Robert Schembs
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Indianapolis, IN 46204

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