QDROs are a lot like two legged dog with an incontinence problem: it takes a very special person to love them.
They are complex. They are the most niche of legal documents, and illegitimate child of state marital property law and federal ERISA law, with a little bit of plan administrator rules thrown in just to make you hate them a little bit more. Many lawyers consider them a malpractice trap. Clients, if they even realize that they need them, hate them even more.
So why do I love them? I can think of a few good reasons.
10. It’s fun being a nerd with a niche.
There are somewhere in the neighborhood of 3 million family law attorneys in the state of California alone. Okay, I made up that number, but you had to think about it for a minute, didn’t you? The same goes for every state: divorce lawyers are everywhere. That’s not a bad thing: given the number of divorces in this country, and the number of parties that screwed up trying to represent themselves, we may have a ton of divorce lawyers but we probably actually need more.
But I don’t want to be one of many. I like practicing something weird. No other lawyer is going to come up to you at a party and ask you about your thoughts on fiduciary duty between spouses, but if you are a QDRO lawyer, you will probably get questions from divorce lawyers about retirement accounts.
9. Clients really need the money.
I probably share this experience with personal injury and workers compensation attorneys, but my clients are typically desperate to get to the pot of gold at the end of the rainbow. If my client is the retirement plan participant (a.k.a. the employee-spouse), they typically call when they are about to retire and find out that there is a hold on the pension or 401(k) and they will not have any money to live off of. Conversely, the other side typically calls either when they hear that the employee-spouse is about to retire or right after divorce, because they need cash quick.
While QDROs are anything but quick, they are a source of money for the recently-divorced (see the early withdrawal penalty exemption) or the soon-to-be-retired. And it is immensely gratifying to tell the client the good news that the checks will start arriving soon, especially if the QDRO process was a long and nasty one.
8. We Often Find Buried Treasure
My mother worked for more than a dozen hospitals over the course of her career. She still wonders if she has retirement plans that she simply forgot about. Like her, many people forget about accounts from previous jobs (or they pretend to forget). Depending on state law, if the parties neglected to mention that asset in the divorce, it may no longer be fair game for the non-employee spouse. Then again, in some states, it is.
Last week, I found a $250,000 plan for one client that her ex-spouse didn’t disclose. (This was in a state where we could re-open the divorce.) This week, it was a semi-disclosed pension. Sometimes, these are life-changing sums of money that the divorce lawyers simply overlooked.
7. I Like Having Lawyers’ Backs
Speaking of lawyer mistakes, it is pretty much an everyday occurrence that I run across a mistake by a divorce lawyer on a settlement agreement with regards to the retirement accounts. Plans are misidentified, omitted, or the language dealing with the split either doesn’t exist or is painfully inapplicable – like applying pension division instructions to a 401(k). That’s kind of like telling someone to check the spark plugs on a bicycle.
When lawyers make these mistakes, my first call is always to the lawyer. The lawyer not only appreciates the heads up most of the time, but they usually agree to fix their mistake at no cost to the client. Sure, I could draft the judgment modifications myself and perhaps bill more hours, but then I would be setting the former lawyers up for an angry call or bar complaint from the client who now has to pay me for the cleanup.
6. QDRO’s Are Shockingly Versatile
You would not know it from your average divorce settlement, but QDRO’s are shockingly versatile. They can be used for child support. They can be used to equalize a property settlement (non-employee spouse gets a massive payout from the 401k, while employee-spouse gets the home). For pensions, the parties can include preretirement survivor benefits, postretirement survivor benefits, and many plans have a handful of payout options – from a 10 year certain (fixed payouts for ten years) to a joint and survivor 75% (pension payments for life, plus a reduced benefit of 75% after the employee-spouse dies).
That’s just scratching the surface. There are side deals to avoid early withdrawal penalties, QDROs for attorneys fees, QDROs to shift the tax burden of alimony payments (though this one is a real pain and not typically worth it), etc.
5. Every Divorce Needs Me
Nearly every single divorce is going to have retirement accounts at stake. And while many unrepresented parties will horse trade one plan for another, not understanding the massive differences in valuations and returns that could be costing them tens of thousands of dollars, if not more, pretty much every divorce should result in QDROs – the most fair division of an asset is typically to simply split that asset. From a business perspective, there is a ton of business out there for me and my firm, so long as people continue to get divorced.
4. Every Divorce Lawyer Should Use Me
Remember when I mentioned that every single week I see terrible divorce settlement agreements full of mistakes with regards to retirement plans? That’s why I started a subscription service for lawyers where they can pay $100 per month and I will help them with the settlement agreement language, along with unlimited consultations on what the different plans and options are for the parties.
It is not enough to write into the stipulated settlement agreement that “Plans will be divided by QDRO.” You’ve now left the following up to the parties to figure out:
- what to do about loans against the plan;
- are there preretirement and postretirement survivor benefits;
- which pension retirement payment option is required;
- who pays for the QDRO;
- which lawyer does the QDRO, or should the parties hire some consultant or website (NO!);
3. Flat Fee Work Beats Billable Hours
I detest billable hours. I did not like them as a divorce lawyer, and I really hate them now. They encourage lawyers to work more slowly, and inefficiently. For me, I see the flat fee as a motivator to embrace efficiency, technology, and repetitive processes that reduce administrative time.
I bill the whole thing up front. I use document automation to speed up the drafting. 90% of my cases are done entirely through email and 95% of them never require meeting the client.
Most of my clients are ecstatic about our speed and efficiency, which is required on our end to turn this into a scalable business
2. I Work From Anywhere
I met my wife in Los Angeles. We moved to New York for her medical residency. We travel to the Philippines frequently.
Even with all that, more than half of my clients are in California to this day and I crush it for clients in seven states no matter where I am physically located. You can’t do that with litigation, at least not easily. But with QDROs, my biggest problem with virtual work is just the filing – and most states have e-filing to some extent.
1. The Clients
I have alluded to it before, but most of my clients leave ecstatic. If they have just gone through a long divorce, this is the last step that sets them entirely free. If they were short on money, this might be the last step to getting them a massive check or a monthly pension payment. Many call me because they cannot retire until this is done – so I rushed to get the draft court ordered done and over to the retirement plan so that they don’t have to go a month or two without an income.
With flat fees, there are never bad surprises. And because I so often turn up accounts that people forgot about, there are sometimes really great surprises.
Let’s Talk QDROs
I will admit it: I did not always love QDROs. There were a few times after switching to them as my primary practice area where I considered walking away entirely, either due to frustration with filing issues or because it just felt like there was too much to learn between state family law and federal ERISA law. There are certainly easier ways to make money as a lawyer, and I’ll never get rich pushing flat fee cases en masse.
But now I get it. I see the nuances of QDRO law like Neo staring at the code in the Matrix. I get to help lawyers and I get to help clients, and almost everybody walks away with a smile on their face. Isn’t that why we all got into law in the first place?