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.
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)

  1. 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 >>
Related Articles
  1. Retirement

    Divorcing? The Right Way to Split Retirement Plans

    Mishandling how you define and allocate retirement-plan assets in a divorce can cost you plenty in taxes and aggravation. Here's how to do it right.
  2. Retirement

    Worst IRA Mistakes You Can Make

    Here are some costly mistakes that you should avoid with your individual retirement account.
  3. Retirement

    Tips For Moving Retirement Plan Assets

    Moving assets is common when changing jobs or retiring, but you have to do this carefully to avoid penalties.
  4. Retirement

    5 Myths That Could Hurt Your Retirement

    If you're making financial and lifestyle choices based on these retirement myths, you could be missing out on benefits that could give you a better future.
  5. 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.
  6. 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.
  7. 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.
  8. Retirement

    Don't Spend Your Retirement-Fund Cash This Way

    Before you cash out or raid one of your retirement funds, consider the following things you should not do with that money.
  9. 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.
  10. Retirement

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  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. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
  6. Excess Accumulation Penalty

    The penalty a retirement account owner or the beneficiary of ...
Hot Definitions
  1. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  2. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
  3. Series 7

    A general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Expatriation Tax

    An expatriation tax is a tax on someone who renounces their citizenship. In the United States, the expatriation tax provisions ...
  6. Earnings Stripping

    Earnings Stripping is a commonly-used tactic by multinationals to escape high domestic taxation by using interest deductions ...
Trading Center