Bossing the QDRO Process-Divorce Rich SNACKS

Ever wondered how quickly you should act on a Qualified Domestic Relations Order (QDRO) to claim your rightful share of an ex-spouse's retirement assets? We take a quick dive  into the QDRO process in this "snack" episode, offering you practical advice on gathering essential documents, choosing the right QDRO preparer, and ensuring that all parties cooperate to avoid unnecessary delays. With expert insights, I emphasize the importance of keeping the lines of communication open and navigating this complex process with urgency and precision.

Time is of the essence, and understanding the critical timing of QDROs can make a significant difference in your financial well-being post-divorce. Learn  the potential risks of delays—such as losing access to funds if your ex-spouse dies, remarries or retires before the QDRO is finalized. This episode is packed with actionable tips designed to empower you with the knowledge to act swiftly and safeguard your financial future. Share these insights with anyone you know who might benefit, and ensure you’re fully prepared as you navigate this crucial aspect of divorce proceedings.

• POST DIVORCE QDRO AND ASSET TRANSFER MANAGEMENT SERVICES WITH JACKI: Make an appointment to learn more about our new FLAT FEE divorce transition packages. Starting in 2025, Roessler Divorce Consulting is offering a new flat-fee service for post-divorce transition coaching. CLICK HERE TO BOOK NOW:
  • https://calendly.com/roessler-jacki/post-divorce-transition-coaching-consult?month=2025-01
• QDRO DRAFTING RESOURCES
  • Divorce Solutions (248-354-0495) https://www.divorcesolutionsllc.com
  • The QDRO Company (877-661-7376) https://www.theqdrocompany.com/

Visit us at https://www.roesslerdivorce.com/ to learn more about Jacki's practice and to find valuable resources for your case.

Chapters

• 0:09 Navigating Quadro Process in Divorce
• 13:00 Critical Timing for Quadro Process

Transcript

Speaker 1: 0:09

Welcome to the Divorce Rich Podcast. I'm your host, jackie Ressler. I've been a certified divorce financial analyst for 28 years, helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering, divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing. Rich means many things to many people. I believe the best definition of being rich is someone who has access to many resources. Along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future. Hi everyone, and welcome back to the Divorce Rich Podcast. This is Jackie Ressler, and I'm so excited to share that.

Speaker 1: 1:16

The episode you're about to listen to is part of our brand new mini-series in 2025 called Divorce Rich Snacks. These episodes are going to be sprinkled throughout our regular lineup for 2025, but they focus on one of our main pushes for 2025, which is financial literacy in divorce. They offer practical advice and financial literacy in a quick, digestible format and are really based on questions that I get from my clients every day in my practice. That I get from my clients every day in my practice. I'm so glad you're here to join me and listening in on this special episode. It's one of our Divorce Rich Snack episodes the first one, actually and it's all about the quadro process. So this is really not going to be about quadro details. If you're listening and you're not sure what a quadro is, a quadro is a Qualified Domestic Relations Order, or QDRO for short. We refer to them as quadros. But if you're getting any part of your ex's retirement account assets from their employer, then you need a quadro.

Speaker 1: 2:22

And if you walk away with anything from this episode, I hope that what you're going to take away from it is that one, quadros take time. Two, you have to be proactive. If you're the one that's going to be receiving the money, you have to proactively go out and make sure that this happens. And three, it's confusing and delays can just cause more problems. So it needs to be done quickly, be proactive, and this is going to take a little bit of time.

Speaker 1: 2:53

So the first step is you want to gather together the paperwork. Most attorneys in Southeast Michigan, where I work, from quadro-drafting out to a third-party, independent quadro-prepare. If you're listening in another state, it might be a little bit different, but in any case, you want to be the one to get that paperwork started. So in the show notes for this episode, I am going to be linking the three major quadro preparers that I work with in Michigan and their contact information is right there if you need it. So you're going to want to get their paperwork and you need to fill it out the intake forms. When you fill those out, you want to make sure that you have handy not only your own personal information but your spouse's personal identifying information, so you need their social security number, their date of birth and their current address. You're also going to need a copy of your judgment, divorce or your settlement agreement as well, as probably you are going to need to send them part of a payment.

Speaker 1: 3:51

Usually, in most cases that I see, people are splitting the quadro drafting fee, but you want to check within your judgment of divorce language and see how that is supposed to happen for your case. In any case, once you get that paperwork done, you're going to want to submit it to the quadro preparer and they'll take it from there. They will look through the documents, let you know if they're missing anything, if they're missing anything from your spouse, they'll reach out to your spouse. This is where you need to be proactive. Sometimes quadros get stuck when the one spouse isn't offering to pay or isn't willing to pay their part of the fee. That can be a problem. I'm going to suggest, just like I would if you were a good friend of mine or my sister or a family member if your spouse isn't willing to pay their half of a small quadro drafting fee, it's probably worth your while to go ahead and pay it fee. It's probably worth your while to go ahead and pay it. Think about this Most of your wealth, for many people, is tied up in qualified retirement plans. To delay it because you're worried about paying for a portion of the fee that's not yours, it's just not worth it.

Speaker 1: 4:58

Your Quadro Preparer can also add in something in the Quadro that will give you an extra dollar amount from the actual Quadro itself, because you've paid that fee up front. So you need to be the squeaky wheel and follow up on it. Once the Quadro is prepared, then it gets sent out to all the parties, that's you, your ex-spouse, your attorney, their attorney. Everyone needs to review it and sign it and, yes, you should have your attorney still involved at this point. You want to make sure that your attorney reads it and compares it against the judgment to confirm that it is exactly what you and your spouse intended it to be. Sometimes a small change in the wording in a quadro can make a really big difference, so you still want to have your attorney involved. Hopefully your attorney is the one that takes the ball and runs it down the court and gets it entered in the divorce court. Once you have it entered in the court, you've got a judge's signature on that. Then someone needs to take responsibility for sending that order to the plan administrator.

Speaker 1: 6:02

So what is a plan administrator? That is a good question. A plan administrator is a third-party entity. It's not either a lawyer, it's not the custodian of the account. It's not where the money is held. It's not the quadro prepare of the account. It's not where the money is held, it's not the quadro prepare. The plan administrator is the one that will review the quadro from the company's perspective and make sure that it is okay, and they'll send out a letter once they get it saying yes, it's been approved or no, it's been rejected and we need to have it revised.

Speaker 1: 6:34

This is another point in the process where you need to be involved. I have a couple of cases right now that I'm working on with clients where we are trying to get those quadros through the finish line and a couple of them are stuck in this pending state. According to ERISA, which is the federal law that governs quadros, the plan administrator doesn't have any limit of time that they have to get the orders approved, unless the person who they're approving it for is already retired, and then their time limit is 18 months to make a decision. 18 months, that's a long time. So, again, you need to be the squeaky wheel. You need to be proactive. Time so again you need to be the squeaky wheel, you need to be proactive.

Speaker 1: 7:19

Find out where was the quadro sent. If you're not sure, get a hold of your lawyer and ask for the address and the phone number of where it was sent to. And you reach out to them to see hey, did you get my quadro? What's the holdup? Even if the quadro has already been sent to them, you never want to take a back seat in this process because, again, this benefits you. If the majority of your wealth is going to be coming from the Quadro assets, you need to be proactive. So once you find out where the Quadro is, usually you'll get a letter once the plan administrator receives the Quadro saying hey, we got it, we're going to review it. If you haven't gotten that letter, you need to find out why. Let's fast forward a little bit and say that now you get a letter in the mail that says yay, congratulations, your quadro has been approved. There's going to be a mandatory 30-day hold placed on your money and the money in the account for either you or your ex-spouse to write a letter saying you dispute how it was calculated, the amount of money. So now we have another delay.

Speaker 1: 8:23

What I want to again emphasize here is that if you're thinking that you're going to take money from the quadro and you're going to pay off legal fees, you're going to put a down payment on a house, let's assume that you're not going to actually get the money in your hand for three to six months after the divorce. I'm going to say that again so that it sinks in. It might not be in your hand the money for three to six months or longer after the divorce. I have cases that they've been going on for a year and they're still going back and forth with the language. It's always okay for you to ask a question, it's always okay for you to call your attorney and ask where it's at, and it's always okay for you to be the one to follow up on it. So you get the letter the quadro has been approved.

Speaker 1: 9:10

What happens if you get a letter that says, hey, this quadro was rejected. What does that mean? It means that there might be some conflicting language in the quadro or that the person that reviewed the quadro from the plan administrator side they don't know exactly They've got something in there that they don't like and they need it reworded. It happens. It doesn't mean that the quadro preparer drafted it incorrectly, it just happens sometimes. So now it gets kicked back to the quadro preparer. They need to make a change, everybody needs to sign it and review it. The amended order now gets entered with the court again and we start all over again with sending that amended order out to the plan administrator. There have been times in my life as a quadro preparer where an order has been resubmitted four or five times, and that's because the people that work at the plan administrator they're not always trained exactly in what they're supposed to look for in a review, and so sometimes you might get a rejection on one thing, but they don't tell you all the things that are wrong with the quadro. They just tell you the first thing and then it gets kicked back again for the second thing, and on and on. So again we're talking about some potential delays. They may not be the fault of anyone really involved, but again, you want to make sure that you are on top of it.

Speaker 1: 10:29

Once you've gotten that final approval letter, you're going to need to fill out a form that says how do you want the money At this point. The form is going to allow you three options. One option take a total distribution, so you take the whole thing out in cash. If you do that and you take a total distribution in cash, you are going to pay ordinary income taxes on that distribution at your highest marginal tax bracket. However, you will avoid the 10% penalty that usually applies if you're not 59 and a half years old because of a special quadro exception. It's IRS Regulation 72 T2C, and that's what allows you to take that money out while still paying ordinary income tax, but avoiding the 10% penalty. Another option is that you can roll over the entire amount into an IRA account in your name or into your current 401k, if you want. That is a non-taxable event that just would go directly over to that account and then that money would be managed or invested by you or your financial advisor. The third option is a little bit of each. You can take a partial distribution in cash and you can roll over the remainder to another account.

Speaker 1: 11:49

I'm going to highly recommend that, once you get that letter, if you don't have a financial advisor, that you find one that you can consult on. What do you need to do with that form? You want to make sure that you fill out that form correctly. If you fill it out incorrectly, let's say, and you take out money in cash that you wanted to roll over, they're going to automatically withhold 20% at least in ordinary income tax and send it to the IRS If you let them know that was a mistake. Now you need to come up with the cash that extra 20%, to make up the difference and then, of course, you'll get it back at the end of the year when you file taxes. But that's not ideal. So the quadro process again, it can be long, it takes time. You want to be proactive One of the things that I provide for clients, even when I don't work with them during their divorce, is I will do one-on-one coaching and consulting for clients in a very limited scope, flat fee package to help them manage transfers from multiple quadros, multiple IRA account transfers, even brokerage account transfers.

Speaker 1: 12:51

This stuff is just confusing, but I highly recommend even if you're not going to use someone like me to track that that you set up your own spreadsheet.

Speaker 1: 13:00

I know I love a spreadsheet. It doesn't have to be a spreadsheet, it could just even be a document that you create that you are tracking the status of everything that needs to be transferred, and the quadro needs to be at the very top of your list. Again, if something happens to the plan participant, the owner of the account, if they die, remarry or retire before you get the quadros done, you could end up getting a limited amount of money or nothing from the account and then having to go back and file a claim against their estate. Timing is absolutely critical on this. So get the quadro process started quickly and I hope that this episode gave you some great, actionable tips on how to go about doing that. Thanks for listening in. Thank you so much for taking time out of your day to listen to Divorce Rich Podcast. If you like this podcast, please follow us on Apple or anywhere that you download podcasts and share this link with any friends or family that you think might benefit from this information.