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How are pre-marital funds accounted for in QDRO?


Guest Chelsi

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Guest Chelsi

In calculating the alternate payee's share, is non-marital money (money the participant invested in the plan before the marriage) deducted off the top before the 50% split is done, or is this money deducted after the 50% split is done (from the AP's 50% share)?

For example: The total value of the participant's acocunt is $200,000. The particpant's pre-marital amount is $10,000.

Is the alternate payee's share figured 1) $200,000 minus $10,000 equals $190,000. 50% of $190,000 equals $95,000; or

2) 50% of $200,000 equals $100,000. $100,000 minus $10,000 equals $90,000.

#1 favors the alternate payee and #2 favors the participant. Is there actually a correct way to calculate this? If so, can someone make sense of this mathematically for me?

Thank you in advance! This board has some really helpful and knowledgable people.

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I think from an equitable and marital/community property law perspective, #1 would be favored over #2. But what does the QDRO say? If it says, as is common, that the ex-spouse gets 50% of what accrued during marriage, that is #1. However, a QDRO could be drafted in a way to give the #2 result--unless that $10,000 has already been awarded to another AP per a prior QDRO.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Guest Chelsi

The divorce agreement says the ex-spouse gets 50% of the amount that accrued during the marriage. So, that would be #1 in which the pre-marital amount is first deducted from the whole, and then the 50% is figured?

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The divorce agreement says the ex-spouse gets 50% of the amount that accrued during the marriage. So, that would be #1 in which the pre-marital amount is first deducted from the whole, and then the 50% is figured?

That's how I understand that.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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And keep in mind that there is no requirement that it be a 50/50 split at all. I saw one recently where the participant didn't care for the invetment choices in the 401(k), so the QDRO gave his ex the entire 401(k) and he kept more of the other assets to offset it.

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  • 3 weeks later...
Guest Chelsi
Are you a tpa? The DRO really needs to give you precise dates. We wouldn't recommend accepting a DRO that says "amount accrued during marriage"

The DRO stated the distribution as the amount that accumulated between date of marriage (date 1) and asset cut off date (date 2), with losses/gains to distribution date.. The Plan rejected this language anyway.

What's a tpa?

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What's a tpa?

Third Party Administrator

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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