QDRO and Retirement benefits
THere are three partied involved in this situation. Father (deceased), ex-wife, children beneficiaries.
Father retired, applied for benefits from the union. At the time, ex-wife was the beneficiary. At the divorce, it is my understanding that no benefits were changes and no QDRO issued. After the divorce, father received court order instruction that ex-wife was to pay benefits she received to children beneficiaries net of taxes due. Court order was not submitted to the pension plan administrator.
Father passed, ex-wife began collecting benefits. Ex-wife is keeping the benefits and children beneficiary are relying on court order for her to pass them through.
Is the ex-wife entitiled to the payments because of a QDRO? It is my understanding that a QDRO is the only instrument that will direct payments to the children beneficiary.
If the ex-wife agrees to the net of tax payment, should we consider it a victory and let sleeping dogs lie? Based on what I know, the ex-wife would most likely win if the issue went to court?
Tnak you for the feedback.
Douglas Voisard
Voisard Asset Management Group
Permalink Submitted by Alan Spross on Thu, 2007-11-08 23:39
This court order does not appear to contain the required elements of a QDRO, and is not intended to be a direct order binding the pension plan. Apparently the intent was to allow the ex to collect the survivor benefit, report the tax liability, and then remit the remainder to the children which would be tax free to the children. It seems critical to determine if the ex was still entitled to the direct benefit as a result of the divorce. For certain plans, the divorce may have voided her beneficial interest, and the plan may have some default provision.
Children may need to return to court to enforce the order on the ex if the ex is even entitled under the plan to receive the benefit given the divorce. If the order is enforceable, it appears her taxes would have to be calculated with and without the pension benefit to determine the tax liability that resulted from the benefit. The gross benefit less the tax calculation would have to be remitted to the children. Seems like the children’s counsel should be contacting father’s counsel that obtained the order in the first place prior to acting.