A QDRO is a Qualified Domestic Relations Order that details how monies from a qualified retirement plan are transferred from one spouse to another upon a Massachusetts divorce. Once the Court and Plan Administrator approve the QDRO, the Plan Administrator will send the alternate payee a form asking the alternate payee where he or she wants their money deposited or what form they want to receive it.
The alternate payee can fill out the form or take it to a financial planner or broker to complete.
The form offers several options:
The alternate payee may place the funds into an existing IRA;
- The alternate payee may set up a new IRA in which to deposit the funds;
- The alternate payee may set up their own 401K to deposit the funds; or
- As an interesting option is to request the funds in cash because the IRS has a special rule that allows the alternate payee to receive the cash without having to pay the normal 10% penalty. Instead, the alternate payee only pays income taxes at their taxable rate. This is a little known benefit, and it is one divorcing parties should consider if they need cash now. However, if the alternate payee does not need cash, they should put the money in another retirement plan, and let it grow.
Whether you are in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar either by email or telephone 978-844-4095 to schedule a free one hour no obligation consultation to discuss your particular needs.