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Second Parent Adoptions in Maryland after Assisted Reproduction
An increasing number of people are relying on the use of Assisted Reproductive Technology to build their families. For some families, including many LGBTQ+ families, a sperm donor may be used with one party's egg, resulting in one parent who is biologically related to the child, while the other parent is not. While Maryland may recognize both parties as parents to the child, it is still important for the non-biological parent in such a scenario to utilize the formal adoption process to ensure greater protection of their parental rights.
Maryland courts regularly grant "second parent adoptions" in a variety of scenarios. However, in certain situations, the law allows for a more simplified process for "second parents" to finalize the formal adoption of their child when the parties are married at the time of conception or birth, or when the parties use Assisted Reproduction to conceive their child.
This simplified approach under Maryland law applies to:
an individual who is the spouse of the prospective adoptee’s mother at the time of the prospective adoptee’s conception or birth; or
an individual who, together with the prospective adoptee’s mother, consented to the conception of the prospective adoptee by means of assisted reproduction with the shared express intent of being parents of the prospective adoptee.
In such a case, the petitioner must file:
a copy of the petitioner and prospective adoptee's mother's marriage certificate (if the parties were married at the time of the child's conception/birth); or
evidence of the parties' shared express intent to become parents of the child by means of assisted reproduction. This includes a copy of any written agreement consenting to the conception of the prospective adoptee by means of assisted reproduction (for example, contracts entered into by the parties with cryobanks and/or fertility clinics).
Additionally, in either scenario, the petitioner must file:
a copy of the prospective adoptee's birth certificate; and
a statement explaining the circumstances of the prospective adoptee's conception in detail sufficient to identify any individual who may be entitled to notice or whose consent may be required.
Under this process, the court may not require an investigation or hearing on the adoption petition except for good cause. In most of these cases, the court will be able to make the necessary findings required by the law based upon the filings and documents alone. Therefore, the adoption can be granted more quickly and often without any required appearance in court.
Jane Rodgers handles a variety of adoptions including second parent adoptions. Jane has worked with many LGBTQ+ families in finalizing their second parent adoptions with the court. Contact our office at 240-396-4373 to schedule a consultation.
Unconventional QDRO Uses: Can a QDRO Require that a Participant Receive Payments By a Specific Date?
When dealing with the division of pension interests one of the first questions to ask is should the division be done as a shared or separate interest. In short, the separate interest division gives the former spouse/alternate payee authority in when they will begin to receive pension benefits, with little to no restrictions based on the Participant’s decisions, and is paid over the former spouse/alternate payee’s lifetime. With a shared interest division, the former spouse/alternate payee will only receive benefits if, as, and when the Participant does, and requires a survivor benefit to continue to receive benefits if they outlive the Participant.
In a shared interest division, which may be the only kind of division available the former spouse/alternate payee usually wants some kind of guarantee or at the very least notice of when the Participant will begin to receive their benefits. This desire is completely logical – for retirement income planning it’s important to know when income from each source will be received.
So many people ask, can we include in the QDRO that the participant will retire and begin to receive pension benefits on or before a certain date, and the answer is no, we cannot. A QDRO is instructions from the Court to the retirement plan for how to divide the plan benefits once they are being paid, in accordance with the plan’s existing payment rules. Under no circumstances does the retirement plan (divorce or otherwise) have the authority to require the participant to retire and begin to receive benefits. Therefore, the QDRO cannot create that authority.
So the next question that we’re asked is could that language be included in a settlement agreement, or can it be asked of the judge in a trial? This answer completely depends on state law, so it’s best to consult with a local family law attorney for specifics.
Is the former spouse/alternate payee then left to the whim of the participant in a shared interest division?
Unfortunately for the former spouse/alternate payee that answer is yes. The most helpful provision in an agreement that we’ve seen, which can be put in the QDRO is that the participant waives privacy with respect to their pension benefits so that the former spouse/alternate payee can receive information from the pension plan as to when the participant may be retiring and the amount of the participant’s benefit.
This does not mean that the pension plan will take the initiative to reach out to the former spouse/alternate payee to notify them that the participant has filed to begin receiving benefits. Rather, it means that the former spouse/alternate payee may reach out to the pension plan to see if the participant has filed to begin benefit payments. If so, the pension plan would also have benefit payment estimates prepared that they could share with the former spouse/alternate payee. The pension plan will not likely run additional estimates at the request of the former spouse/alternate payee if they were not already prepared for the participant. This waiver of privacy is simply access to existing information.
Are there any exceptions to this?
In a presentation from an attorney in California, we heard of a law in California that could require the participant to begin making direct payments to their former spouse if the participant were of retirement age but continued to work. The presenter explained this came from a case where an employee continued to work out of spite, hoping to work until their death so their former spouse would not receive a penny of their pension. The court allegedly required the employee to begin making payments to the former spouse from his salary until he began to receive benefit payments from his pension. The presenter also stated that a few other Western states were considering similar laws. (DISCLAIMER: this information is included to show the differences between states across the nation. Attorneys at Markham Law Firm are not licensed to practice in California. We are relying on the information presented by the California attorney as of 2022, and California’s laws may have changed since then. It is important to consult with an attorney in each state in which your divorce may occur so you can choose the state that makes the most sense for your circumstance.)
It seems unlikely any such ruling would occur in Maryland or the District of Columbia any time soon.
November is National Adoption Month!
Many families are created through adoption, and there are different ways to adopt a child. The focus of National Adoption Month is to spread awareness about the adoption of children and teens in the foster care system with the goal of finding them safe, supportive, and loving forever families. There are many reasons why people may choose to adopt a child. It is also possible to adopt an adult.
In Maryland, there are three main types of adoption:
Public Agency Adoptions are adoptions involving the placement of children through the department of social services. These adoptions may involve children who have been placed in the foster care system due to parental abuse, neglect, or abandonment, or in cases where a child has lost their parents due to other circumstances.
Private Agency Adoptions involve the use of a private agency to match a child who is available for adoption with a family who is seeking to adopt. Private Agency Adoptions can involve children from within the same state as the prospective adoptive parent(s), from a different state, or from another country (through International Adoption).
Independent Adoptions are adoptions through private parties. Most commonly, independent adoptions involve family members, stepparents, or second/co-parents. In Maryland, there is also a statute that provides for a simplified adoption process when a person is seeking to adopt a child conceived through Assisted Reproductive Technology with the prospective adoptee’s mother while married or with the shared express intent of being parents of the child.
Adoptions Generally:
All adoptions require consent of the natural parents to the adoption when such parents can be found, except in cases where a court has terminated parental rights (such as in a case of abuse, neglect, or abandonment).
In cases involving an agency, the agency often is granted guardianship with the right to consent to adoption.
In adoptions involving a child over the age of 10, the child must also consent to the adoption.
In cases involving the use of Assisted Reproductive Technology, it may be the case that one of the biological parents was a donor who has waived parental rights. In such a case, the other biological parent may consent to the adoption by the second/stepparent without termination of their own parental rights.
In most adoptions, there are requirements for investigation into the prospective adoptive parent(s) including home studies, post-placement visits, medical examinations, and criminal background checks. In certain cases, the Court will also appoint an attorney on behalf of the prospective adoptee.
Jane Rodgers handles Adoption matters in Maryland and the District of Columbia. If you are interested in pursuing Adoption, contact our office at 240-396-4373 for more information.
Certain Tax Considerations in Transferring Retirement Interests
Transferring retirement interests pursuant to a divorce can allow the parties to shift the tax burden of some payments from retirement funds from one party to the other. Whether this is something the parties want to do or is reasonable in their specific case is a matter for their individual attorney to analyze.
Payments from a Pension Plan
Payments from a pension plan can typically be divided at the gross or net levels. While some plans have a different definition for “gross” or “net”, for purposes here “gross” means the largest, unreduced payment from the plan, prior to any deductions, and “net” means the smallest, most reduced payment from the plan, after all deductions.
If divided at the gross level, that means each person will pay tax on the funds they receive. This division type is most common because it is as if each party earned their share of the pension, and are paying taxes based on their own income level.
If divided at the net level, then the participant is paying taxes at their income level for the entire benefit, and the payment made to the alternate payee/former spouse is free and clear of any tax implications. This type of division is exceedingly rare. While the participant is responsible for all of the taxes, the alternate payee/former spouse’s share is reduced also by any other deductions the participant may elect, such as a survivor benefit cost for a future spouse, or health insurance or life insurance premiums. Typically this type of division is used when both parties are retired and the income amounts are already known and they prefer to divide their retirement income based on the figures they know. The alternative is that the income to the alternate payee/former spouse may be different than intended based on the alternate payee/former spouse’s tax bracket.
Transfers from a Defined Contribution Account (Traditional accounts only)
When transferring from one retirement account to another, so long as the receiving account is eligible (check with the financial institution to see if the account is eligible to receive the funds) there will be no tax payment triggered by the transfer. However, the tax must still be paid on the funds at some time, so under this scheme, the tax will be paid by the person receiving the funds, but at the time the person takes the funds out of their retirement account. Typically, this is when the receiving party is retired and using their retirement accounts for income.
A retirement transfer may also take place to access funds when no other more-liquid funds are accessible. In this case, if the alternate payee/former spouse has a lower tax bracket, it may make financial sense to transfer the funds out of the retirement account and have the alternate payee/former spouse take the funds as cash. In this scenario, the alternate payee/former spouse would pay tax on the transferred funds immediately (and reconcile it when filing their taxes for that year). When a transfer is done for this purpose it may be ‘grossed up’ to account for the tax payment, meaning the tax payment is effectively shifted from the alternate payee/former spouse to the participant. This is most likely when the transfer is coming from retirement for a non-retirement asset, such as a home interest buy-out.
Why Transfer Instead of Withdrawal?
In the last scenario, the retirement funds in exchange for the home interest, it seems somewhat illogical to add the step of transferring the funds to the alternate payee/former spouse to take as cash rather than having the participant take the funds out as a withdrawal. For parties that are not yet at retirement age, there is the early withdrawal penalty to consider. If the participant is not of age and withdrawal the funds directly, the early withdrawal penalty is applied. However, the early withdrawal penalty is avoided if the alternate payee/former spouse receives the funds as cash through a QDRO transfer. Note, this is applicable for 401k and other similar type of accounts that are governed by ERISA. It is not the case for non-qualified plans or IRAs.
Disclaimer: This firm focuses on the practice of family law and the information provided herein related to tax considerations is legal information and is not tax advice. You may want to consult with a tax professional for any specific questions related to your case and circumstances.
Further, not all plan types follow the rules described above. The plans described and rules referenced herein are for the majority of plans. You should review the rules for the plan in your case carefully to determine how it interacts with the tax laws.
Contact our office at 240-396-4373 for QDRO related assistance.
In a Retirement Transfer, Who Handles What?
Different people or organizations cover many steps in a retirement transfer.
As you will read below, the parties are responsible for most steps. However, that responsibility can be delegated to the party’s attorney or the retirement order drafting attorney if they choose. The most important part of each of these steps is making sure it is clear who is taking the responsibility. While the blame belongs to both parties to follow through on getting the retirement order drafted and submitted (if not agreed otherwise), which one, in particular, must be proactive to start the process and make sure to see it through to completion?
It is best practice to state the responsibility clearly in any settlement agreement or have the judge designate one party to be responsible for the retirement order process in an order.
So, how does it happen, and who is responsible for each step?
Figure out the division of the retirement asset. The parties are responsible for this or for taking the matter to court and requiring the Court to order a division.
Have the Retirement Order prepared. The parties are responsible for hiring an attorney to prepare the retirement order and providing all necessary information. Such information includes the document that explains the asset division, a statement from the account that will be divided, and sometimes a letter or additional information from the account being divided. In best practices, the order is prepared while the parties negotiate their agreement or immediately following the divorce. All information the drafting attorney needs would be gathered in discovery or informal document exchange. The parties should agree on which is responsible for hiring the attorney or if it will be a neutral/joint representation.
Paying for the Retirement Order to be prepared. The parties are responsible for determining how the drafting attorney will be paid.
Signing the Retirement Order. The parties are responsible for signing the retirement order, or they may have their counsel sign on their behalf if appropriate in their jurisdiction.
Submitting the retirement order to the Court. The judge must sign the retirement order. The parties or their counsel are responsible for submitting the order to the Court.
Obtain Certified Copies from the Court and mail them to the Plan. Plans require that certified copies, or true test copies, be submitted. These special copies come with a seal from the Clerk of the Court to certify that the order is a true representation of the order the Court has entered. The parties are responsible for determining who will be responsible for this step. It could be a party, their counsel, or the attorney who drafted the QDRO.
Respond to the Plan’s questions. The parties are responsible for answering any questions posed by the Plan in a timely manner. This may include but is not limited to, the person receiving the funds being responsible for filling out forms to notify the plan of where they would like their funds sent.
Figuring out where the funds should be sent. This is for the party receiving the funds. Perhaps it is worth a conversation with a financial planner to figure out what type of account should the funds be rolled into, or should some of the funds be taken as cash and the rest rolled over? This is not a decision that an attorney can make on the party’s behalf.
Transferring the funds. The plan administrator will notify the plan’s financial institution when the retirement order is approved and instruct them to transfer the funds. The financial institutions will then coordinate to transfer the funds to the receiving party’s account. This transaction may also involve the party’s financial advisor, depending on the type of account the funds are being transferred to. The attorneys do not have access to the accounts or the fund transfer. The parties have the most access to check up on the status of the transfer because they already have access to their own accounts. The financial institutions view attorneys as third parties and typically need the account holder’s social security number, date of birth, and address to get any information if they get any at all. Some institutions require that the account holder be on the phone to share the status of the transfer.
Depending on how quickly the financial institutions and courts are processing and how quickly the parties provide information to the drafting attorney, this process can be as quick as 2-3 months or can take much longer.
If you have additional questions regarding your retirement order, or need assistance contact our office at 240-396-4373.
Is My Spouse Entitled to Property I Acquired After the Date of Separation?
Going through a separation or divorce can be a challenging and emotionally charged time. Among the many concerns that arise during this process is the division of property and assets. One common question that arises is whether a spouse has any claim to property acquired after the separation has occurred.
What is considered marital property?
In Maryland and the District of Columbia, if property is acquired by one spouse after separation but before the divorce is finalized, it is still considered marital property. Campolattaro v. Campolattaro, 66 Md. App. 68, 81 (Md. Ct. Spec. App. 1986); Boyce v. Boyce, 541 A.2d 614, 616 (D.C. 1988); D.C. Code § 16-910(a). Marital property includes assets acquired during the marriage, while separate, premarital property typically includes assets acquired before the marriage, through inheritance, or as a gift.
What is equitable distribution?
Maryland and the District of Columbia follow the principle of equitable distribution, which means that marital property is subject to an equitable division between spouses by applying several factors. The factors include the circumstances surrounding the property's acquisition, both parties' monetary and non-monetary contributions, and the overall equitable distribution of assets. Separate, premarital property is generally retained by the individual who acquired it.
Do I need a written agreement to divide assets?
To avoid potential disputes and resolve the division of property, many couples choose to enter into a written separation and property settlement agreement. A written separation and property settlement agreement is a legally binding contract that establishes the terms of the division of assets. A signed separation agreement will stop the accumulation of marital assets after the separation but before the divorce is finalized and therefore will govern whether your spouse has an interest in property acquired after the date of the separation agreement.
If you need assistance with your separation and property settlement agreement, please contact Markham Law Firm at 240-396-4373 .
What is the Marital Share Formula and How Does It Work?
When dividing a pension many times the division is described as a formula, which is defined as, some percent times a fraction, in which the numerator of the fraction is the total number of months of creditable service in the retirement plan earned during the marriage and the denominator is the total number of months of creditable service in the retirement plan earned as of the date of retirement. Some jurisdictions call this the “coverture fraction.”
For those who are not currently using algebra terms in their daily language, the numerator is the top number in a fraction and the denominator is the bottom number in the fraction. When the numerator is divided into the denominator the result is a percent (or quotient for those being technical, but for the purposes of the marital share fraction, it’s a percent).
And, for those that need a numerical example, let’s say a person works 120 months at a job earning credit in the retirement system, and during that time, they were married to their spouse for 60 months. The fraction would be 60 / 120 = 50%. Therefore, 50% of the pension is marital, and 50% is non-marital. In a divorce circumstance, typically only the marital portion is being divided, so the participant would retain their 50% non-marital portion for themselves, and the 50% marital portion would be available to divide with the former spouse.
What about the common scenario where the person who has the pension is still working for that employer, earning new credit in the retirement system after the marriage, how does this formula account for that?
The way the court order is drafted is by using the definition of the fraction underlined in the first paragraph. This language allows the retirement plan to be responsible for doing the math when the participant retires. While the numerator can be determined as of the date of marriage, the denominator won’t be. Therefore, the retirement plan will use the instructions in the QDRO when the participant retires, when the information is known.
Going back to the 60 / 120 scenario. Let’s say the participant continues to work for this employer another 120 months after the divorce. Now the fraction is 60 / 240, or 25% is marital. The definition of the fraction being provided to the retirement plan is what allows for the plan to properly account for the former spouse’s share as of the date of retirement, which usually is not known as of the divorce.
But wait, that math seems to highly benefit the participant. Why would a former spouse agree to this?
The marital share fraction, once reduced to a percent is multiplied by the total benefit earned by the participant. The total benefit earned by the participant is typically calculated using some combination of the length of the employment and the highest or final salary earned. For participants who continue to work after the date of divorce, that means they are working toward a larger retirement benefit.
For former spouses, this means that while the marital percent of the benefit may be decreasing as the participant continues to work after the divorce, the benefit that the marital percent is multiplied by is larger due to increased time spent earning credit in the pension system and a larger salary that is used to compute the participant’s total benefit.
So the way to think about it is that if the benefit is calculated at the time of the divorce, the former spouse may be receiving a larger share of a smaller benefit, however, when the calculation is redone at the time the participant retires, the former spouse is receiving a smaller share of a larger benefit. Proportionally, the math works out to limit the benefit payment to the former spouse to amount attributable to the marriage.
Many states have their own version of this formula. Some call it the marital share formula, others refer to it based on the case in which the formula was adopted. For example in Maryland it is referred to as the Bangs formula. This is one way to calculate the former spouse’s interest in a pension due to a divorce. Depending on the circumstances this might not be the appropriate method to divide the pension. It is best to discuss the options with your local divorce counsel.
It is also important to keep in mind that some plans will place a limit on the amount that can be awarded to a former spouse. Specifically, the military limits it to the benefit the member has earned as of the date of divorce, so that all of the increased service time and promotion benefits are retained solely by the member. In such cases, it is important to alter the fraction as described above so that the denominator does not continue to increase. Alternatively, the International Monetary Fund limits the benefit awarded to the former spouse to be 50% of the marital share. Thus, if the parties wanted to award a larger percent to the former spouse say to offset for a different marital property, they would not be able to award the former spouse something like 65% of the marital share of the pension because of the plan’s limitations.
Dealing with pensions and retirement assets can be difficult, and knowing the plan’s rules as well as your state’s rules with respect thereto is key to a successful negotiation. If you’re looking for help dealing with a retirement plan or understanding the plan’s rules, please call us at 240-396-4373 or email us at qdro@markhamlegal.com to see if we can help.
2nd UPDATE FROM THE COURTS – Maryland’s New Firearm Law
As promised in my last update regarding Maryland’s new firearm laws, portions of which went into effect on October 1st, there are additional updates. For some background, when new laws go into effect, there is often litigation regarding the constitutionality and/or interpretation of these laws in the court system. Many people have very strong feelings about guns one way or the other, so this area is ripe for legal challenges.
Since my last update, there has been an additional change – On October 2, 2023, the United States District Court for Maryland modified its September 29th order. On September 29, 2023, the court issued an injunction, prohibiting Maryland from enforcing several provisions of the new law, including the prohibition against carrying firearms in locations selling alcohol, private buildings, or property without the owner’s consent, and within 1,000 feet of a public demonstration. The provision of the law that prohibits a person from carrying a firearm in a private building or on private property without the owner’s consent may be enforced by Maryland since that provision was not part of the lawsuit challenging the law. Stay tuned for additional updates.
Morgan E. Leigh, Esq.
Markham Law Firm
Click Here to read more about Maryland’s New Firearm Law and previous updates. Call 240-396-4373 to schedule a consultation with Morgan E. Leigh, Esquire.
NEW: Maryland Divorce Laws as of October 1, 2023
On May 16, 2023, Governor Wes Moore signed new legislation into law which completely overhauls the Maryland divorce law scheme. This new legislation went into effect on October 1, 2023.
How does this new legislation affect you and your divorce?
Limited Divorce
The new legislation repeals limited divorce in its entirety. Limited divorce did not dissolve the marriage and could be more easily compared to a legal separation. It provided parties a basis to seek relief when they did not otherwise qualify for, or for some other reason could not request, an absolute divorce. This relief included child custody, child support, and alimony. However, you can no longer request a limited divorce in Maryland.
Absolute Divorce
The new legislation also revises how you can receive an absolute divorce under the law. When you file for a divorce, you must do so under certain statutory grounds. Prior to the new law, you could receive an absolute divorce in Maryland under the following grounds:
Adultery
Desertion
Conviction of a felony or misdemeanor with incarceration
12-month separation
Insanity
Cruelty of treatment or vicious conduct toward a spouse or minor child
Mutual consent
However, the new legislation has changed these grounds and now, you can request an absolute divorce under these new grounds:
6-month separation
Irreconcilable differences
Mutual consent
Why this change matters
While limited divorce was rarely used, it gave parties who could not end their marriage a way to still obtain necessary protection under the law. Parties may have been unable to end their marriage for many reasons, including religious restrictions and access to health care. Repealing limited divorce may have a negative impact on individuals in these, or related, circumstances.
However, the new legislation has rendered it easier to seek an absolute divorce in Maryland than it was before. Previously, the law only provided two ways to seek a divorce on no-fault grounds: 12-month separation (including separate homes) or mutual consent. A 12-month separation is often not economically feasible for many couples, because maintaining two separate households is costly, creates childcare issues, etc. To qualify for a divorce under mutual consent, parties are required to settle all outstanding issues related to the marriage, including property division, alimony, child support, and child custody, expressed in a signed, written agreement.
If you did not qualify for either of those grounds for divorce, you had to prove that your spouse committed some wrongdoing under one of the fault-based grounds. Proving fault-based grounds for divorce could be difficult, timely, expensive, and often heightened the conflict between the parties.
The new law makes divorce more attainable in multiple ways. First, it shortens the requisite period of separation to six months and removed the requirement that parties must live in separate homes. Rather, parties can now be separated but reside in the same household as long as they maintain separate lives and bedrooms. The law also repeals many of the fault-based grounds for divorce and added “irreconcilable differences” as a non-fault basis for divorce. While it is unclear how the courts will address “irreconcilable differences”, it is generally applied in situations where the marriage has broken down and the parties wish to seek a divorce without proving fault, separating for the requisite time frame, or coming to a mutual agreement on all related issues.
Pending Divorce Actions
If you have a divorce action currently pending in a Maryland court, this legislation will not affect your case. These changes only apply to filings initiated on or after October 1, 2023.
If you have further questions regarding Maryland’s new divorce laws, please contact Markham Law Firm at 240-396-4373 to setup a consultation.
Division of Retirement Assets in a Divorce: Ask for What You Want - Be Precise
Growing up, many people hear, “You can’t get something if you don’t ask for it,” to learn to be more assertive rather than just accepting what life gives them. The same can be said for the division of retirement assets in a divorce. Each state has statutes and rules that may be the default for the division, and each plan may have further default rules for the division of such assets. But that’s exactly what those rules and statutes are – defaults in case the parties do not agree to something else.
Why is it Important to Know the Default Rules?
Sometimes, the default rules might be exactly what the party wants to happen. In this case, asking for something else does not make much sense. To know this, one must know the default rules. If your attorney is unfamiliar with them, it may be time to hire an expert to consult on the matter to ensure you’re doing the right thing.
What’s a situation in which the default rule might be what the parties want to do? Let’s say the parties agree that alimony shall be paid from a pension that’s already being paid out. Alimony payments typically do not get adjusted with cost-of-living adjustments. Most pension plans have a default rule that if the payment amount to the alternate payee (former spouse) is described as a dollar amount per month, then no cost-of-living adjustments will be applied, and the alternate payee will continue to be paid that dollar amount until the plan participant’s death (or the QDRO is vacated). In this case, the default rule is likely what the parties wish to occur.
If pension division language is described as a percent of the monthly payments or by a marital share formula/fraction, many plans have default rules that cost-of-living adjustments will also be divided in such fashion. How does this impact the alimony situation? If the parties intend that the alternate payee receive $2,000 per month, without the cost-of-living adjustments, but decide to phrase it as X% of the participant’s pension payment per month, then pension plan may interpret that to include the cost-of-living adjustments.
While cost of living adjustments are not much each year, over the lifetime of a pension, it can amount to hundreds or thousands of dollars a year, which does make a difference.
While this is undoubtedly an area where parties with more sophistication can try to use the default rules to their benefit, it’s better to keep transparency and negotiate in the open. Does the alternate payee want cost of living adjustments? Ask for them. Does the alternate payee want a survivor benefit? Ask for it. Does the pension plan participant want the alternate payee to pay for the survivor benefit? Ask for it.
What are the Consequences of Vague Language in a QDRO?
As a person preparing QDROs for pro se parties and attorneys alike, one of the hardest things we have to tell clients is that even though they have an agreement or went to court and have a judgment of divorce, they aren’t done figuring out the division of marital assets because some aspects of the retirement division are not described.
Why is this so hard? Because typically, by the time someone gets their QDRO drafted, they think they are at the end of the divorce road and can limit their contact with their former spouse. It can be emotionally rough on those parties when we tell them to go back to the negotiating table to figure out a few more things.
How can people be sure to address all issues in advance? Ideally, reach out to the retirement plan during negotiation or before trial, and be sure to know all elements of the plan that can be divided in the divorce. Then, ask for the division scheme your client wants.
What if you can’t reach the plan in time before the agreement needs to be signed or the trial in the matter?
Here’s a list of the most common terms that should be addressed in a QDRO for a defined contribution plan (401k, 403b, 457b, TSP plans, etc.):
Plan Name
Transfer amount
Valuation date
Market/investment experience
Payment of the Plan Administrator’s fee to review and implement the QDRO
And here’s a list of the most common terms that should be addressed in a QDRO for a defined contribution plan (pension, annuity type):
Standard pension
Pre-retirement survivor benefit
Post-retirement survivor benefit
Refund of contributions
Cost of living adjustments
Early retirement subsidies
Disability benefits
Shared or Separate Interest division
Note that these are only the most common terms for each list above and do not apply to all plans. It is best practice to get the information specific to the plans involved in your case and work directly with the plan. Most notably, some plans do not even accept QDROs or do not allow survivor benefits to a former spouse, so especially in those circumstances, it is important for your client’s future planning to make an effort to deal with the case-specific information. If you need assistance dividing retirement assets in your case, you call us at 240-396-4373 or email us at qdro@markhamlegal.com to see how we can work with you to serve your clients best.
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