A:

Because a qualified domestic relations order (QDRO) is a court order, it cannot be reversed once it is received and processed by the retirement plan. If the instructions to reverse the QDRO were issued by the court, as an amendment to the original QDRO, the administrator of the retirement plan would need to review the new instructions and determine whether they could be followed.
If you owe your husband money, you may want to consider alternate sources (instead of your retirement plan) of payment. Funds paid to anyone from your retirement plan will be considered a distribution to you (see exception below). The distribution will be treated as ordinary income, which will be subject to income tax and, if you are under age 59 ½, an additional 10% early-distribution penalty. In addition, because the assets are being held in a certificate of deposit (CD), the financial institution may assess an early-withdrawal penalty, if the withdrawal occurs before the maturity date. Financial institutions are required to allow you a certain period within which you can rescind the CD without penalty. Check with your financial institution to determine whether this period has expired.
Exception
If the funds are distributed from your IRA to your husband as a result of a court-approved divorce decree, the amount will be treated as a distribution to your husband (instead of you), and he will be responsible for paying any tax and penalty, unless he rolls or transfers the amount to an IRA of his own.
Note: Generally, the term QDRO is used for qualified plans, and divorce decree is used for IRAs. Some judges use the terms interchangeably.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. I just received a QDRO distribution from my ex-wife during our divorce. What is the ...

    During the divorce I acquired some debt and relocated with a lower income job. I’m 57 yrs. old. I currently have a ... Read Answer >>
  2. My sister recently received a QDRO from her ex-husband, approximately $180,000. Will ...

    My sister is an alternate payee, and she wants to make a $30,000 withdrawal from the account.  Read Answer >>
  3. Will I have to pay additional taxes on my income next year due to a QDRO Cash Payout?

    I am expecting a QDRO in which I plan to take a cash payout, then rollover the remaining amount into an IRA. I understand ... Read Answer >>
  4. I will be receiving monies from a QDRO executed pursuant to my divorce. I would like ...

    There are several issues to consider: The early distribution penalty - Assets distributed from a qualified plan in accordance ... Read Answer >>
  5. Do you include a qualified domestic relations order on your taxes?

    I received money from a qualified domestic relations order, and federal income tax was withheld. Do I have to claim this ... Read Answer >>
Related Articles
  1. Retirement

    What's the Tax Hit on an IRA Withdrawal?

    How much taxes you'll pay on IRA withdrawals depends on a variety of factors. Use this guide to plan ahead.
  2. Retirement

    How a 401(k) Works After Retirement

    Find out how your 401(k) works after you retire, including when you are required to begin taking distributions and the tax impact of your withdrawals.
  3. Retirement

    Retirement Plan Tax Prep Checklist

    Here's a list of items you need to have in order by tax time, including paying attention to those pesky required minimum distributions.
  4. Financial Advisor

    Advising FAs: Explaining Estate Planning to a Client

    As the old saying goes, you can't take it with you. For this reason, it is important to have a current estate plan in place to protect your family and belongings.
  5. Retirement

    5 Secrets You Didn't Know About Traditional IRAs

    A traditional IRA gives you a current-year tax benefit and future years of tax savings – minus the income restrictions that limit who can have a Roth IRA.
  6. Retirement

    Tapping Retirement Funds Early – Without A Penalty

    The IRS offers several ways to skirt the 10% penalty on early retirement distributions.
  7. Retirement

    How an IRA Works After Retirement

    You've read a lot about saving for your future retirement with IRAs. But what happens to the account when the future is here, and you actually retire?
  8. Financial Advisor

    Closing In On Retirement? Read These Tips

    If you're within 10 years of retiring, you and your financial planner should heed these essential tips.
  9. Personal Finance

    10 Tips For Achieving Financial Security

    Follow this sound advice and plan for a comfortable future.
  10. Financial Advisor

    How the Self-Employed Can Prepare for Retirement

    The self-employed aren't saving enough for retirement. Here's what they can do to change that.
RELATED TERMS
  1. Qualified Domestic Relations Order - QDRO

    A type of court order typically found in a divorce agreement ...
  2. Substantially Equal Periodic Payment - SEPP

    A plan that allows individuals who have invested in an IRA or ...
  3. IRA Plan

    A plan that individuals may establish to arrange and plan for ...
  4. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  5. Excess Accumulation Penalty

    The penalty a retirement account owner or the beneficiary of ...
  6. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center