How Much Does a QDRO Cost?
A Qualified Domestic Relations Order (QDRO) is a judicial order that recognizes the marital property rights of both spouses in a retirement plan, and directs the plan how and when to split the benefit.
How Much Does a QDRO Cost?
QDRO attorney fees (or non-attorney service provider fees) can range anywhere from $299 to $5,000 or more. There is no one answer to this question, unfortunately, because the work required will depend on the facts and circumstances of the particular situation, including the age of the divorce and the cooperation level of the parties. However, the old adage “you get what you pay for” often holds true when it comes to ensuring a QDRO is properly drafted and taken all the way through the qualification process.
Important: When to Draft a QDRO
One thing about QDRO attorney fees that is almost certain: a QDRO drafted after the divorce will be more costly than one done during the divorce. If a divorce attorney begins the process of reviewing the retirement plan, drafting the QDRO, and getting it pre-approved during the divorce, or works with a QDRO attorney during that time to complete those same steps, it is much less costly to the parties than waiting until after the divorce is final. This is because there is a structure around the divorce process that already requires the parties to share information about assets, and the parties are also motivated to get things done in order to obtain the final judgment of divorce. In addition, there is typically an attorney (or two) and a court involved to some extent, and they can intervene to get the parties to cooperate if needed.
Furthermore, spouses are typically not permitted to dissipate marital assets while in the process of divorcing, which keeps costs down compared to after a divorce, where the alternate payee’s QDRO attorney may have to take more legal steps to protect her client’s marital share. For example, after the divorce a retirement plan participant may move funds or take a loan against a 401(k)-type of retirement account, so that determining the marital share becomes much more difficult. Where a pension plan is at stake, a participant that has reached earliest retirement age may begin to draw his or her pension, and may do so without the alternate payee’s knowledge. If the alternate payee wants to recoup the back-owed amounts, a QDRO attorney will need to take additional steps with the court and the pension plan.
Importantly, if the QDRO process is started during the divorce, it is also much more likely the AP will end up with proper separation agreement language that encompasses all aspects of the benefits she or he is entitled to. It is incumbent on every divorce lawyer to gather the retirement plan information and divide the benefit based on what the plan actually offers, versus a generic statement that the AP will receive “50%” of the benefit. Under no circumstances is this generic language sufficient to ensure the AP’s full marital share.
QDRO After Divorce
But even if the QDRO was never drafted during the divorce, it is almost always worth any additional cost to get the QDRO done after the judgment is final. For example, even a modest pension payment of $500/month starting at age 62 would be $120,000 over just 20 years. And most pensions include cost-of-living adjustments, so the hypothetical $500 payment would increase at least somewhat year-to-year. If the QDRO division relates to a defined contribution plan, such as a 401(k), then even a relatively small transfer of $10,000 will include gains from the stock market over time that will significantly increase retirement income. For example, a $10,000 investment that grows at six percent over 20 years results in just over $32,000, even without any additional contributions going into the account. There are many online investment calculators that allow users to choose their age, starting investment amount, and years until retirement to get the estimated growth, like this one.
In short, even if your QDRO seems costly in the short-term, the long-term income to be gained usually more than doubles, and far exceeds the cost of obtaining the QDRO.
Understanding QDRO Attorney Fees
Be wary of “QDRO preparers” advertising a low flat fee to prepare a QDRO, since at a minimum the preparer should review the retirement plan at stake before drafting a QDRO, be knowledgeable about the law, and see the QDRO all the way through to qualification by the retirement plan. You may end up paying a flat fee and then, later, paying an hourly rate for QDRO attorney fees because you need to draft a new order to meet the plan’s requirements for qualification.
Recap: How Much Does a QDRO Cost?
An experienced QDRO attorney that understands the facts and circumstances of your situation can provide at least an estimate on the cost of obtaining a QDRO. Contact McKain Law if you would like our assistance with an estimate and the steps you need to take to protect your share of the marital retirement benefits.