You Can Grab Your ExA’s IRA – Legally
The marriage is over. It’s shot. Kaput. After years of “wedded bliss”, there hasn’t been much of the bliss lately, and you file for divorce. Maybe he’s been cheating. Maybe he wants trade you in for a younger model. Regardless of the reason, you have your future — and maybe some kids’ future — to watch out for. What to do?
Until relatively recently women who found themselves to be on the altar of retirement and sacrificed have had almost microscopic legal means to make sure they could continue a life somewhat like that to which they have been accustomed.
A woman, and recipients of spousal support tend to be females, spends a lifetime with a husband, raising the children, keeping the household together while he travels on business only to find herself out in the cold when he tells her those four heart-stabbing words: “I want a divorce.”
Historically, there has been little a person could do to make sure they received court-ordered support payments. A law, little known by laymen, is helping to change that.
Under New York law, a long-term marriage is one that has lasted ten years or longer. Typically, in a long marriage, there is the presupposition that the lower earner will receive some spousal support from the higher earner. Another idea is that the longer the marriage existed, the longer the spousal support will last. When many long-term marriages end in divorce, there is a clause in the settlement dealing with spousal support and is usually worded something like: “…spousal support to be paid until the death of either party, remarriage of the individual receiving spousal support, or further court order.” It’s fairly common for the person paying the spousal support to seek some modification, usually downwards, in the future.
In what may be the most frustration issue a divorced woman faces after a spousal support agreement is reached is the failure of her ex to pay the court-ordered support. Typically, the ex-husband makes a few payments, sometimes just partial payments, and then stops mailing the checks at all.
The U.S. Census Bureau conducted a review of their data and found that the majority of ex-husbands choose to disregard the financial term of their divorce settlements. Once the couple has reached retirement age, it is increasingly hard to get the non-paying ex to honor their spousal support obligations.
Divorce lawyers have witnessed the scenario many times and are finding the growing popularity of Qualified Domestic Relations Order (QDRO) to be a potential mechanism which might help their client to receive the support payments they are legally entitled to.
A QDRO can be used by a judge to mandate that the spouse awarded spousal support may receive part of their ex’s retirement benefits, including pension plans, 401Ks, 403Bs and other plans, excluding Individual Retirement Accounts.
A QDRO is especially beneficial for divorcing women who are building their financial strategy for retirement. The QDRO is backed with the force of federal law and is rapidly becoming a valuable tool for collecting past due support payments.
Not many lawyers have a thorough understanding about QDRO and how they may be used. With the right wording in the settlement and a thorough understand of the law, a QDRO is a tremendous tool to force fairness.
Timing is Everything
Making use of the power of a QDRO requires that the requirements be met during the divorce or at least in conjunction with the divorce settlement. Waiting may take the option of QDRO off the negotiating table with no way to put it back in place.
Tax Matters
One thing to remember if your divorce lawyer is thinking about using a QDRO as part of the divorce proceedings, or settlement, is to understand the tax implications.
Typically, no penalty is attached to an alternate payee’s distribution of benefits under a QDRO. Transferring the funds directly into an IRA may also allow for the avoidance of withholding tax.
A QDRO has many hidden, complicated angles, twists and turns. Many lawyers outsource the QDRO preparation. So find an attorney experienced in the development of a QRDO and using a QDRO can save the frustration of having to hunt down spousal support payments.