Making decisions about retirement plans can be complicated and there are a number of consultants and professionals that claim to be able to prepare retirement division orders, often called Qualified Domestic Relations Orders (QDROs). It can be difficult to understand the differences between them and why each one might be needed.
Pension appraisers, QDRO lawyers, and consultants all have unique roles in the process of managing retirement plans and assets. It’s important to understand these roles and their limits in order to make the best decision for your assets. In this blog post, we’ll discuss the roles of pension appraisers, QDRO lawyers, consultants, and template websites, and explain why each one might be necessary in managing retirement plans and assets. We’ll also provide an overview of what each professional does and how they can help. By the end of the post, you’ll have a better understanding of the differences between these professionals and how they can help you make informed decisions about your retirement plan.
- A Pension Appraiser May Draft QDROs But Can Also Calculate The Value of Each Party’s Share For a Buyout
Pension appraisers are specialists in pension and retirement plan valuations, and may be called upon to prepare Qualified Domestic Relations Orders (QDROs). But their core specialty is in valuation calculations – how much is that pension worth today? If you’re considering a buyout of a pension interest – the employee wants to keep her whole pension, for example – you’ll need a pension valuation done to determine how much that buyout should cost.
Also, where accounts have been rolled over or need a separate interest (such as a pre-marital balance) calculated, many pension appraisers will handle this as well.
Pension appraisers do, often, also draft QDROs. For simple plans, this may not be an issue. However, in our experience, they are typically bad at answering legal questions and explaining the documents to the parties. They’re basically working off a template and providing that to you – with little understanding of the document itself.
- A QDRO Consultant is a Vague Term – Some May Be Able to Draft QDROs But Be Careful
A QDRO consultant is often a vague term that may refer to a financial planner, lawyer, or other professional who is knowledgeable about drafting QDROs. While it is possible to find a QDRO consultant who can accurately draft a QDRO, one should be aware that a QDRO consultant is usually not a lawyer and does not provide legal advice. Furthermore, it is important to make sure the consultant is up-to-date on the most recent changes in QDRO laws and regulations, as even minor errors can lead to costly mistakes and delays.
While these consultants are sometimes cheaper than lawyers, that’s because they don’t have legal expertise, malpractice insurance, and a state bar association backing their moves. Ultimately, it is best to seek the help of an experienced QDRO lawyer when drafting a QDRO, but for low value accounts or simple divisions, many people choose to go with a cheaper consultant without any issues.
- Paralegals Often Draft QDROs With Mixed Results – Do They Have Enough Expertise?
Paralegals are often tasked with drafting Qualified Domestic Relations Orders (QDROs) to divide retirement assets in divorce proceedings, but they often have mixed results. The reason for this is because many paralegals typically lack the necessary legal expertise to accurately and properly draft a QDRO. While they may be familiar with the applicable laws and regulations, they are not experienced in the finer points of QDRO drafting, which often requires a deep knowledge of the various retirement plan rules and regulations.
Consider this: most lawyers, after years of law school and practicing family law, don’t understand QDROs. The topic is too niche, too dry, too complex. So, do you really trust a paralegal that may not even have a college degree with your retirement assets? It may work out – it often does – but it is far more of a risk than going to a QDRO attorney.
And we get it: after a divorce, you’re financially tapped out and don’t want yet another billable hour attorney, but consider that most QDRO lawyers are flat fee and they carry more expertise and ask yourself: is a few hundred dollars in savings worth it?
- Template Websites Provide Cheap QDROs Drafted in Minutes, But Are They Good Enough?
Template websites provide a quick, easy, and cheap solution for drafting QDROs. These websites allow you to fill in some basic information about the pension plan, and then a QDRO is automatically generated. The disadvantage with these templates is that they can be basic and may not cover all of the factors that must be taken into consideration for the QDRO to be valid. Additionally, some template sites offer low quality documents that may contain typos or be missing important details. Plus, the templates are built for the most common divorce divisions first, and if your arrangement is unusual, the language of the template may not even work.
And this one can’t be downplayed: most of these template website do a very poor job of walking you through what the questions mean, like “how should loans as of the valuation date be treated for purposes of the QDRO?” Most lawyers don’t understand that – and your template website expects you to answer it. Answering that wrong could cost you thousands of dollars.
It is important to use a reputable template site if you are going to use one, and to double check with a qualified attorney before submitting the final document.
- Lawyers That Specialize in QDROs Provide The Most Expertise and Careful Division of Retirement Accounts
Choosing a lawyer that specializes in Qualified Domestic Relations Orders (QDROs) is the best way to ensure that your retirement accounts are carefully divided. Experienced QDRO lawyers have the expertise to navigate the complexities of family law and the Internal Revenue Services (IRS) rules that govern division of retirement accounts. QDRO lawyers understand the intricate details of these accounts and the legal documents required to properly divide them. They also have a thorough understanding of the division of pension benefits and other qualified plans, like 401(k) plans or stock plans. If a QDRO is needed, then hiring a lawyer that specializes in QDROs will ensure that the division of funds is done properly and in compliance with the law.
Pension appraisers, QDRO lawyers, templates, paralegals, and consultants are all paths towards getting a QDRO done. Each professional has their own skills and cost that can help you achieve your goals. Pension appraisers can provide a comprehensive valuation of the pension, QDRO lawyers can help ensure the QDRO is properly drafted, and consultants, templates, and paralegals may be good enough to handle simpler orders at a cheaper cost. Taking the time to consider each professional’s unique skillset will help you find the right solution for a successful pension division.