Under Utah law, spouses in a divorce case are entitled to one-half of any retirement funds that have accrued during the marriage. This includes 401Ks, IRAs, annuities, and the like. But unlike other divisions of marital property, this one is not achieved by the Utah divorce decree itself-it must be carried out by a separate court order called a qualified domestic relations order, or QDRO.
There are many mistakes to avoid when preparing a QDRO. Let’s discuss three mistakes you should avoid at all costs.
The first mistake is not having your divorce attorney prepare the QDRO at or near the time of the divorce. Delaying it far beyond the actual date the decree was signed can have potentially adverse consequences. Another source of delay occurs when clients prefer to hire a different attorney who prepares QDROs for a flat rate. Besides the inevitable delay in this approach, hiring a different lawyer ignores the crucial fact that your divorce lawyer must ask certain questions and obtain certain documents during the litigation to ensure all your rights regarding the retirement accounts are protected. It is crucial that you hire a Utah divorce lawyer who is skilled not only in divorce litigation but in QDRO-preparation, so you can avoid this mistake.
The second mistake is not to designate which spouse will pay for the QDRO-preparation. A typical provision is that both parties share the cost, but this can be negotiated based on the overall property division. Payment of QDRO fees can be used as a bargaining chip in negotiations by your Utah divorce lawyer to obtain the most favorable result possible.
The third mistake is failing to indicate how losses or earnings will be treated, if at all. Your Utah QDRO will have an “allocation” or “distribution” date, which is typically the date the Utah divorce decree was signed by the judge. Let’s say that date is June 1st. There will inevitably be some lag time between that date and the date your QDRO is signed by the judge (although, as discussed above, you want to reduce this lag time to the extent possible). Let’s say this date is September 1st. What happens to earnings or losses during that three-month period of time? Do they affect your share of the retirement accounts? Or is the payment amount static and unaffected by market forces? Depending on market volatility at the time, this issue can translate into a huge gain or a huge loss.
With the right Utah divorce lawyer, you can successfully avoid these and other mistakes when dividing up retirement accounts through the use of properly-drafted Utah qualified domestic relations orders.
-Jonathan P. Wentz, Esq.
(Mr. Wentz is licensed in Utah and practices domestic relations law, among other practice areas, at the law firm of Snow Jensen & Reece, P.C.)