A qualified domestic relations order ( QDRO ) is commonly ordered by a judge during a divorce when one spouse has a substantial amount of money in a retirement account. This order details how one spouse's employer-provided retirements plans and IRA accounts are handled once the divorce is finalized.
This court order can also apply to benefits that are paid to a dependent, former spouse, current spouse, or child. Once a QDRO is put into place, retirement accounts are typically split evenly between both spouses. QDROs are usually taxed similarly to other standard plan distributions. One difference, however, is that the 10 percent early withdrawal penalty does not apply to cash-out distributions.