Using a QDRO to split future financial benefits

When you get divorced, you split up the assets that you and your spouse own at the time. This is one of the most highly-contested areas in many divorce cases, but most people do understand that they own their property jointly with their spouse and that neither person should walk away from the divorce with everything. 

But what about future benefits and financial payments, such as those from a pension plan or a retirement plan? Say you’re 55 years of age and you’ve been earning your pension during 20 years of marriage. You’re still not planning to retire until you turn 65, so you won’t actually see that money for a decade. But do you have to divide it with your ex all the same?

You may, and this can be done with a QDRO (Qualified Domestic Relations Order). In many cases, people are told to split up the total earned during the marriage. 

For instance, to keep things simple, say your pension will pay you $9,000 per month after you retire. Your spouse wants to claim half of that, or $4,500 per month. However, you were only married for 20 of the 30 years you plan to work. The QDRO may say that your spouse only gets half of those earnings. Since two-thirds of your pension payment is $6,000 per month, your ex gets $3,000. The other $6,000 goes to you. 

Not all QDROs are structured this way, but it gives you an idea of how the process works and why you may have to divide assets that you don’t even have yet. Make sure you know exactly what legal options you can utilize moving forward.