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When two Michigan residents get divorced, they will need to go through the process of dividing their assets and liabilities. Michigan is a bellwether state when it comes to divorce and property division, which is done through a qualified domestic relations order (QDRO) document. A QDRO allows one spouse to keep certain assets while the other spouse receives payments from those assets. There are several ways to optimize a QDRO, and this blog post will outline three. By following these tips, you can ensure that your QDRO is as effective as possible.

Identify the pension or retirement plan

First, understand the types of retirement plans covered by QDROs. There are four types of retirement plans covered by QDROs:

• 401(k): A retirement savings plan sponsored by an employer. Employees can contribute pre-tax dollars to a 401(k), and the money grows tax-deferred.
• 403(b)s: A retirement savings plan offered by nonprofit organizations and some government employers. Like a 401(k), employees can contribute pre-tax dollars to a 403(b), and the money grows tax-deferred.
• Pension plans: Retirement plans offered by employers that provide a guaranteed benefit after retirement.
• Profit-sharing plans: Retirement plans that allow employers to share profits with employees through contributions to their retirement accounts.

Anne N. Pastrana has an in-depth and nuanced understanding of the variety of pension types and how a QDRO divides its assets.

Ensure the QDRO addresses tax implications

Second, consider the tax implications of dividing retirement assets. With a QDRO, you can divide assets without triggering a taxable event. However, you will still need to pay taxes on the distributions when you retire.

For example, if a QDRO transfers ownership of a traditional IRA from one spouse to another, the receiving spouse will be responsible for paying taxes on the withdrawals.

Similarly, if a QDRO transfers ownership of a 401(k) from one spouse to another, the receiving spouse will be responsible for paying taxes on the 401(k) withdrawals. It’s essential to work with a virtual legal service that understands the tax implications of dividing retirement assets with a QDRO.

Use a qualified domestic relation order to provide for children

Third, take advantage of the fact that QDROs can be used to provide for children as well as spouses. You can use a QDRO to provide for their future education or medical expenses if you have minor children.

You can use a QDRO to provide financial support for minor children after divorce by transferring child support payments from one parent to another. They can establish a trust fund for the child’s future education expenses or provide other types of financial support.

In many cases, a QDRO can be used to provide more stability and security for the child than would be possible through a traditional child support arrangement.

By understanding the rules surrounding QDROs in Michigan, you can optimize your order to protect your interests and those of your family.

When you need the industry’s best QDROs, partner with Anne N. Pastrana for virtual legal services

I’ve built a reputation as a responsive problem solver who delivers excellence with every QDRO I draft. My background is in family law. I worked in legal aid in Detroit until transitioning into QDROs, EDROs, and DROs. Since 2012 I’ve drafted almost 10,000 orders for Michigan lawyers. My decades of experience ensure I have in-depth knowledge of the variety of pension plans that qualify for QDROs. I’ve built relationships with lawyers across the state by providing thorough, fast orders that meet the requirements of the court.