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What is the role of a QDRO in a North Carolina divorce?

There are so many jargon terms used in the family court system that it may seem like a new language to someone who is new to this venue. A married adult in North Carolina contemplating divorce may understandably find all of the specialized language related to divorce and property division very confusing.

Unfortunately, those who don’t understand the legal process of divorce may not take the right steps to protect themselves. For example, they may not understand the value of certain tools. A qualified domestic relations order (QDRO) has a confusing name that doesn’t really tell people what the document does. However, there is a reason that many couples in North Carolina end up needing to draft and file a QDRO during their divorce.

What does a QDRO do?

There are certain assets that couples share that are more difficult to divide than others. For example, people tend to contribute significant amounts of their income toward retirement savings. They often use special accounts to minimize taxes now and maximize what resources they have later in life. To prevent people from abusing these special accounts or making poor financial choices that cause hardship later in life, there are tax consequences for withdrawals before someone reaches retirement age. There are often also penalties imposed. Therefore, it would logically follow that those who split an account during a divorce in their 40s would have to take a major loss of retirement savings.

When one of the lawyers drafts a QDRO in accordance with a property division order and has it approved by the courts, they can then file the document with the professional or business managing the retirement account. The QDRO gives the necessary information regarding how to divide the account and the identity of the person who will own the newly created second account. Used properly, a QDRO facilitates the transfer of a specific percentage of the original account’s balance into a new account held by the other spouse without any taxes or penalties imposed. It is a powerful tool for preserving the retirement savings of those already absorbing the costs of a divorce.

For someone who has retirement savings, a QDRO may be a very important tool for the property division process. Learning more about the special terms used in family court and the ways people divide their property in a North Carolina divorce can help people prepare for the future more effectively.