Do I Need a Qualified Domestic Relations Order in NJ?

Going through a divorce can be a contentious matter, as emotions are heightened during this challenging period. However, when coupled with important financial considerations, getting a divorce can quickly become overwhelming. As such, it’s generally in your best interest to connect with New Jersey property division attorneys to help you through this process. This is especially important for the division of retirement accounts, as a qualified domestic relations order is likely necessary. If you’re unsure what this is, you’ll want to keep reading to learn more about this document.

What Is a Qualified Domestic Relations Order?

During the property division portion of a divorce, one of the most contentious aspects of this process is the division of one spouse’s retirement account. Unfortunately, you’ll find that this can be difficult, as there are hefty tax penalties imposed when there is an early withdrawal from the account. Typically, any withdrawal of funds from a retirement account before age 59 and a half warrants a 10% tax on the funds removed.

However, during a divorce, the amount of money accrued in a retirement plan during a marriage is considered a marital asset and, therefore, subject to division during a divorce. New Jersey adheres to the equitable distribution method of dividing marital property, meaning assets are split between spouses based on each party’s contribution to the marriage rather than an immediate equal division.

In order to avoid this penalty, the courts can use a document known as a qualified domestic relations order (QDRO). This document not only enforces a payee’s right to the retirement funds but also allows for the early withdrawal of funds without incurring tax penalties.

What Else Should I Know About This Document?

One of the most important aspects to keep in mind when going through a divorce is that only certain retirement plans require QDROs. Typically, only plans covered under the Employee Retirement Income Security Act (ERISA) need a QDRO. These plans include 401(k)s, profit share plans, and 403(b)s. As such, IRAs are not included, and they are handled like any other asset during the distribution process.

It’s imperative to understand that a QDRO only applies to the funds that were obtained during the marriage. As such, if your spouse had a 401(k) with $50,000 in it prior to your marriage, and they accrued an additional $30,000 before your divorce, you would only be entitled to a portion of the $30,000.

As you can see, property distribution can be an incredibly complicated process to navigate, which is why it’s imperative to connect with an experienced divorce attorney with Haber Silver Russoniello & Dunn to discuss your legal options. Our firm understands how confusing and overwhelming a divorce can be, which is why we are committed to fighting for you during these difficult times. When you need assistance, do not hesitate to contact our team today.