After a Divorce
by Sheryll Bonilla, Esq.
Getting your share of your ex-spouse’s retirement pay isn’t automatic with the divorce decree. The plan administrator isn’t bound by what the judge orders in the decree because the divorce doesn’t involve third parties. You’ll need a separate order, called a Qualified Domestic Relations Order.
Most family law attorneys stop representing a client at the decree and usually inform their clients to find a new attorney to prepare the QDRO. This after-divorce order directs the plan administrator to divide up your ex-spouse’s retirement benefits and send your share to you.
When the benefits are a defined amount (for example, a defined contribution plan), the company can tell you the dollar value of what you will get and send it in a lump sum.
For other types of benefits, such as annuities or pensions, where the benefit will be paid to your ex over many years, the company will simply split the payments and send each of you the share the judge orders.
Your share of your ex-spouse’s retirement benefits is calculated using what is called the Linson formula.
This takes into consideration how long the two of you were married, how long your former spouse worked at the company and earned the retirement benefits, and what the overlap was between the marriage and the employment. This calculation is included in the divorce decree and will be also set in the QDRO so the retirement plan administrator knows how much each of you will get.
You may not get it right after the divorce because generally, your ex must reach the age where they’re eligible to receive the benefits before a distribution can be made. It is still best to prepare the order and submit it to the retirement plan to preserve your rights to the share.
If your ex-spouse marries again, their new spouse acquires rights to the retirement pay. The company could go into bankruptcy. Your ex-spouse could die before you start collecting.
Sending the QDRO to the company gives it notice to set aside the amount owed to you and that you are to be the recipient. If you wait too long and your ex starts collecting in the meantime, plans won’t go through the trouble of recouping those amounts that were supposed to be yours to give to you.
So, the lesson is – to spend the little extra to have the QDRO prepared, signed by the judge, and submitted to the retirement plan to preserve your claim to the ex-spouse’s retirement pay.
Wills and Trusts
It’s a good idea to update wills and trusts made during a marriage. Couples typically give all their assets to their spouse on their death and name their spouse as personal representative or successor trustee.
While a divorce decree generally revokes gifts to a former spouse, it doesn’t cancel gifts made to your in-laws. A decree also does not undo your ex-Spouse or in-laws as your personal representative or successor trustee. That may make it difficult for your alternates to handle your estate after your passing.
If you named your in-laws as guardians for your children in case you die, that’s another thing you might want to consider.
Power of Attorney and Advance Healthcare Directive
Spouses typically name each other as their agent to handle financial and medical matters in case one isn’t able to do so.
Think about who you now want to be your agent and have those old documents revoked and updated to name the new individuals you want to take care of things for you when you can’t.
This article is for informational purposes only and is not to be construed as offering legal advice. Please consult an attorney for your individual situation. The author is not responsible for a reader’s reliance on the information contained here.