Hi Morris,
Hands down the single biggest issue I see is the failure to follow through with
the Qualified Domestic Relations Order (QDRO) or similar division order after
the divorce. A critical part of managing financial affairs, post-divorce, is
making sure you have secured your rights and entitlements to a retirement
plan(s) that was awarded to you in the Separation Agreement/Property Settlement
Agreement.
When I was a Plan Administrator for TIAA-CREF, we handled about 3,600 QDROs a
year and many of them would be submitted to us years after the divorce. Many
things could have happened during that time, the original Participant could
have withdrawn the funds, leaving no money for the former spouse, a Participant
could have switched jobs and rolled the money to another carrier, the
Participant could have retired, greatly limiting the benefit options for the
former spouse or even designating a subsequent spouse for post-retirement
survivor benefits, leaving the former spouse without survivor rights, or
worse-case, the Participant could have died and left all the money to an uncle,
a sister, a drinking buddy or a subsequent spouse, leaving nothing for the
person who was awarded a portion of the retirement plan in the divorce.
As a QDRO drafter today, I have people calling me all the time looking to get a
QDRO done 5, 7 or even 10 or more years after the divorce, not realizing that
this is something that should have been done at the time of their divorce and
that their interests in the retirement plan could be at risk. People don't
expect to die, but they do and this can have disastrous consequences for a
Former Spouse/Alternate Payee who has not completed a QDRO. I literally have
seen hundreds of thousands of dollars evaporate for an Alternate Payee because
the QDRO wasn't done in time. Not all pension plans will accept a nunc pro tunc
QDRO either, and with a defined contribution plan (401k, 457, 403b, etc), the
beneficiary designations on file will trump any QDRO when the funds have
already been paid to the subsequent spouse or uncle, etc, upon the
Participants death.
I always stress to my clients to get the QDRO process rolling once the
retirement plan division has been agreed to and articulated in the Separation
Agreement, even if not yet finalized with the Court.. That will allow time for
the pre-approval process for the QDRO which can take 30-60 days on average, so
that a Plan-Approved QDRO can be ready and entered concurrently with the Decree
of Dissolution or Judgment of Divorce. A QDRO can also be easily revised should
the terms of the division change without affecting the pre-approval from the
Plan (i.e. going from 50% to 60%), in which the pre-approval process mainly
addresses the form of the QDRO for compliance with the Plan provisions and
ERISA, and typically not with the amount of the award, unless the QDRO award is
exceeding 100% of the account balance.
Regards,
Thomas Toxby
Toxby & Associates, Inc.
355 South Teller Street, Suite 200
Lakewood, CO 80226
Tel: (303) 231-1030
Fax: (303) 231-1033
thomas@xxxxxxxxxxxxxxxxxx
-------------- Original message --------------
From: "Morris Armstrong, CFP, ChFC, CDFA" <divorceplanner@xxxxxxxxxxxxx>
I am working on a presentation under the above heading and I was hoping
that people may supply some examples of where people err royally in the
post divorce phase. I imagine, but have no evidence that the errors
are more likely to occur in litigated divorces; so I dont mind hearing
stories from the past.
I also need to address using qualified financial advisors and I am
going to be upfront and state that my belief is that only people who
can operate under the authority of the Investment Act of 1940 as
amended or its state equiavalent should be considered. I know that
radically differs from the IACP however that is the approach I will be
taking there. ( Comments welcome as well)
Please feel free to contact me directly at divorceplanner@xxxxxxxxxxxxx
or post here if people dont mind
Thank you
Morris Armstrong CFP, ChFC, CDFA, AIF, EA
Armstrong Financial Strategies
57 North St
Danbury CT 06810
203 744 9297
www.armstrong-financial.com
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