What is a QDRO and How Does it Work? 

 Posted on May 15, 2026 in Marital Property

Getting divorced is almost always a major financial stressor, but this is especially true when the person getting divorced is over 50 and approaching retirement age. The financial implications of divorce at this age can be especially pressing because there may not be much time to contribute to savings, investments, and other sources of retirement income.

If you are considering divorce and either you or your spouse has investment accounts that are marital property, Qualified Domestic Relations Orders (QDROs) will probably be an important part of your divorce. Whatever challenges your finances present during divorce, our Hoffman Estates, IL divorce attorney is here to help.

What is a Qualified Domestic Relations Order, or QDRO? 

A Qualified Domestic Relations Order (QDRO) is a legal document that directs a retirement plan administrator to divide a retirement account between the account holder (the plan participant) and their former spouse (the alternate payee) as part of a divorce settlement. QDROs are required for certain types of retirement accounts governed by federal law, such as 401(k) plans, pension plans, and other employer-sponsored plans covered under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1056(d)(3).

QDROs are important because they ensure that the alternate payee can receive their share of the retirement funds without triggering penalties or taxes for early withdrawal. Without a QDRO, it may be impossible to divide the retirement account correctly, even if the divorce settlement requires it. 

How Does a QDRO Work?

A QDRO specifies exactly how the retirement account will be divided between the parties. This involves several steps:

• The QDRO must be carefully drafted to comply with both the terms of the divorce settlement and the specific requirements of the retirement plan.

• Once drafted, the QDRO is submitted to the Court for approval.

• After the Judge signs the order, it must be sent to the retirement plan administrator, who reviews it to ensure compliance with the plan’s rules.

• Upon approval by the plan administrator, the funds are divided as directed by the QDRO. The alternate payee can typically choose to roll over their share into another retirement account, receive periodic payments, or leave the funds in the original account until retirement age.

A QDRO doesn't get added automatically when a judge signs your divorce decree. QDROs are separate legal documents that must be drafted, approved by the court, and then accepted by the retirement plan administrator. 

When is a QDRO Used?

A QDRO is used when retirement accounts, such as a 401(k) or pension, are considered marital property and are subject to division during a divorce. In Illinois, only the portion of the account that was earned during the marriage is considered marital property. The portion earned before the marriage remains the individual property of the account holder. 

However, accurately determining the marital and non-marital portions of a retirement account can be a complex process. Not surprisingly, spouses often disagree strongly over how much of a retirement account is marital property. When this happens, spouses may both hire their own accountant to analyze the account, including its balance at the time a couple got married and its growth during their marriage. 

Some retirement accounts don’t need a QDRO. IRAs, for example, are divided through a different process called a "transfer incident to divorce." QDROs apply specifically to employer-sponsored plans covered under ERISA.

Submitting the QDRO to the Court and Plan Administrator

There are certain documents you’ll need before you can submit a QDRO: 

• The final divorce decree or marital settlement agreement

• The retirement plan's summary plan description

• Recent account statements showing current balances

• Any prior domestic relations orders affecting the account

Once drafted, the QDRO goes to the Court for the Judge's signature. After the judge signs the order, it's sent to the retirement plan administrator for review. The administrator checks whether it complies with the plan's rules before approving it and releasing any funds.

What Happens When Both Spouses Have Retirement Accounts?

When both spouses have retirement accounts, the court may offset them rather than divide each one separately. For example, one spouse might have a larger 401(k) while the other has a smaller pension. In that case, the judge might give other assets to one spouse to balance things out. This way, they don't need to issue two separate QDROs. The right approach depends on the full picture of your marital estate, what your long-term financial goals are, and what kind of a deal you can negotiate with your spouse.

What if I Change My Mind and Want to Get Funds from a QDRO Disbursed Now? 

Many people who use a QDRO choose to roll the money into another retirement account to avoid taxes and further build their retirement savings. However, some people later realize they need immediate access to cash after divorce. Starting over financially in your 50s or 60s can be extremely expensive, especially if you suddenly need to secure housing, pay legal fees, or cover healthcare costs on a single income.

However, the money may still be subject to ordinary income taxes. Once retirement funds are spent, there may not be enough working years left to rebuild those savings. Taking a large withdrawal can create serious long-term consequences for your retirement security.

Before taking a lump-sum distribution from a retirement account after divorce, make sure you work with your attorney to understand the tax implications and whether there are better options available. 

Do You Need an Attorney for a QDRO?

QDROs are highly technical and involve both state and federal laws as well as the rules of each specific retirement plan. Errors in drafting or submitting a QDRO can have serious financial consequences, including loss of retirement funds or unexpected tax liabilities.

An experienced attorney needs to not only review your asset division settlement, but also needs to make sure that your QDRO is filled out correctly. Getting a QDRO wrong can mean serious tax penalties.

Call a Rolling Meadows, IL Divorce Attorney 

If you are over 50 and facing divorce, it is especially important to protect your retirement and investments. Contact the Hoffman Estates, IL divorce lawyer at The Law Office of Nicholas W. Richardson, P.C. to discuss your case and learn more about how QDROs can be used as part of your divorce settlement. Call 847.873.6741 today to schedule a complimentary consultation and get the guidance you need in every area of your divorce.