This month, I interviewed my own former spouse David Roessler on my podcast, “Wealthy After Divorce”, which will air on July 21, 2022. Dave is the owner of Divorce Solutions, a Southfield, Michigan based Qualified Domestic Relations Order (QDRO) preparation firm and has over 20 years of experience working in the QDRO minefield.
I am lucky to get the inside scoop from Dave on how to best prepare my divorce financial planning clients when I hand them off to an expert to get their QDROs done. I rely heavily on my own former QDRO drafting experience when helping clients and their attorneys negotiate an optimal settlement. A tiny change in wording in the final Judgment or Settlement Agreement can have significant financial implications for both clients. Since pensions and retirement accounts are usually the largest assets by far in the marital estate, it is impossible to overstate the importance of QDRO experience in Certified Divorce Financial Analyst (CDFA) work.
Dave’s experience and daily work in the QDRO trenches makes him an invaluable resource. Plans are constantly changing their administration rules, and no two are ever alike. Yet, as Dave points out, the biggest barrier to getting QDROs done is motivating clients to put them at the top of their priority list. Read on for Dave’s top tips on protecting your retirement nest egg once the divorce is final.
Get Your Qualified Domestic Relations Order (QDRO) Started
In order to transfer retirement accounts between you and your ex, you will need a QDRO. The Judgment of Divorce is only binding on the divorced couple. It is not binding on third parties, such as retirement account administrators. The only document that will transfer qualified plan assets from one spouse to another is a QDRO. Every day that passes after the divorce without a QDRO puts the client who will be receiving the money in a risky position. If the working spouse dies, retires or remarries before a QDRO is entered, that could severely limit or even eliminate the ability for the ex-spouse to receive their money.
Do Not Let the QDRO Fee Hold Up the Process
Most local QDRO preparers charge a flat fee in the range of $500 per QDRO. Generally, settlement agreements call for the clients to equally share preparation costs. Dave sees many clients who delay getting a QDRO, because their ex will not pay the fee. If it is a defined contribution or 401(k)-type plan, Dave suggests that the person consider paying the full fee to get the order started. He adds language to the QDRO that reimburses them for their ex spouse’s share by adding the additional fee plus taxes to the awarded QDRO amount.
Get Your QDRO Expert Involved Early and Often
Plans change their administrator and administrators change their QDRO procedures constantly. Involving a QDRO expert early in the case to help draft the appropriate language can save significant time in getting the Order approved. It is also helpful to involve a neutral QDRO expert to explain all the division options to both clients. This makes it easier for attorneys to prepare the Judgment and offers a degree of transparency into this sometimes complex process.
Get Help With the QDRO Forms
QDRO intake forms can be overwhelming. They ask a lot of questions that clients may not understand. For example, some intake forms ask the client to supply the plan administrator’s name or phone number. In actuality, finding this information is one of the hardest parts of being a QDRO drafter. It can take hours for an experienced drafter to figure out who is administering a plan. Intake forms sometimes ask clients to explain how they want pensions divided, which again is confusing to many clients.
At Pearl Planning, we help clients complete those forms and explain the decisions. If a client isn’t working with a CDFA experienced in QDROs, it is best to leave those sections blank or ask for help from the preparer directly. Dave often takes down intake form information from clients over the phone to take the stress out of the process.
For more information about how Pearl Planning can assist with QDRO consulting during the divorce and in completing the QDRO paperwork once the divorce is final, reach out via jacki@pearlplan.com.
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Melissa Joy, CFP®, CDFA® is President and Wealth Advisor at Pearl Planning. Reach out for a call today at 734.274.6744.