A law student asked me an interesting question the other day: why do so few attorneys prepare Qualified Domestic Relations Orders (QDROs)? That is a good question. If you ask most divorce lawyers, they will tell you that QDRO work is simply too complicated — they don’t understand the fine nuances of different retirement plans, nor the various options available to divide those plans. Many are afraid of making a mistake and facing a malpractice lawsuit.
While it is true that Quadro’s are complicated, the old days of hand drafting every court order have long since passed. Sure, if someone tried to write a QDRO from scratch and they didn’t have extensive experience in the area, they would probably make mistakes that cost their client dearly. Fortunately, with today’s drafting software, most Quadro’s are a matter of just checking the right boxes, so long as the QDRO is done within a reasonable amount of time after the divorce.
With that being said, though mistakes are fewer nowadays, they do happen. And sometimes the consequences can be devastating.
In this blog post, we will share a real-life example of a QDRO (with a few details changed for privacy reasons) that was drafted incorrectly, leading to costly legal battles and financial losses for both parties. This is the second installment of our QDRO Horror Story series, where we highlight the importance of hiring a qualified and experienced QDRO attorney to handle your QDRO.
The Case of the Missing Spousal Consent
John and Mary were married for 25 years and had two children. John worked as a teacher and had a pension plan with the state. Mary was a stay-at-home mom who did not have any retirement savings of her own. When they decided to divorce, they agreed that Mary would receive 50% of John’s pension as part of their marital property settlement. John had already retired at this point and named Mary as his beneficiary for survivor benefits, in case he died before she did.
They hired a divorce attorney who drafted their divorce decree and QDRO. The divorce attorney was not familiar with the specific rules and requirements of John’s pension plan, and did not consult with a QDRO expert. The divorce attorney simply copied the model QDRO template from the retirement plan and filled in some basic information.
The divorce attorney did not realize that John’s pension plan would allow him to change his survivor beneficiary without Mary’s consent. The divorce attorney wrongly assumed that because survivor benefits had been elected at retirement, that such benefits could not be changed. The truth is, some plans will allow you to make such changes, some will allow it only with spousal consent, and others will not allow changes after retirement. Every plan is different.
In the end, the divorce attorney did not include any language in the QDRO that would protect Mary’s interest in case John died. This means that if John passed away before Mary, her payments would stop.
The divorce was finalized and the QDRO was submitted to the pension plan administrator.
Six months later, John died after changing his survivor beneficiary to his new wife. Mary was shocked and angry to learn that she had no legal claim to any of his pension benefits from that date forward – and that John’s new wife, who he had only just married a few months prior, would instead get his pension for her lifespan.
Mary was now faced with an impossible choice: give up her only retirement income or sue the widow of her late ex-husband. In the end, she could not afford to sue the widow and instead had to get a low-paying job at a local discount store to survive.
The Moral of the Story
This QDRO horror story illustrates how a poorly drafted QDRO can lead to costly legal battles and financial losses for both parties. Never assume that existing benefits will lock in upon executing a QDRO, and don’t use the company’s model QDRO – in most cases, those orders are thin on language that protects the parties. Instead, use our software, which was built by an experienced QDRO attorney and which contains a number of variations of division language, plus language that locks in survivor benefits.
