Why You Need to Get a QDRO Sooner Rather Than Later!

1) When dividing a Defined Contribution Plans (like 401ks) 

Withdrawing Funds Prematurely: Many times, a participant might take money out of the retirement account before the QDRO is finalized. This can reduce or even wipe out the share that's supposed to go to the ex-spouse. Trying to get back this money later can be incredibly difficult and costly, often leading to dead ends. 

Distinguishing Marital from Separate Property: If the divorce happened a while ago, figuring out which part of the retirement funds is marital property (and thus divisible) and which is separate property becomes a puzzle. Over time, plan statements that could help solve this puzzle are lost or destroyed, complicating matters further. 

Lack of Cooperation: As time passes after the divorce, getting the plan participant to cooperate with the division process can become increasingly challenging. This lack of cooperation can stall progress and make it harder to reach a fair settlement. 

Disputes Over Account Growth or Losses: There's often disagreement about how to handle any growth or losses the account has experienced since the separation. Should the ex-spouse's share reflect these changes? This question can lead to disputes that delay the process even further. 

Participant dies before the QDRO is done: You might lose out if your ex remarries and passes away, with the new spouse likely receiving the benefits based on federal law. 

2) When dividing a Defined Benefit Plans

The Participant dies or retires. Waiting to do the QDRO can be even more detrimental. If your ex dies or retires before a QDRO is established, claiming your share will could become an uphill battle with a potential loss of all benefits. The entire pension could , with benefits potentially reverting to the participant or their new spouse depending on how your divorce judgment language is written.

Withdrawing all funds with a lump sum payout. Cash Balance Plans (which are a type of Defined Benefit Plan, and some Traditional Defined Benefit Plans allow for a lump sum cash out. If you wait too long, participant might cash out all funds in the pension before the QDRO is finalized. This will eliminate what is assigned to the ex-spouse. Trying to retrieve these funds can be incredibly difficult and costly, often leading to dead ends.