If you or your spouse has a pension, 401(k) plan or IRA, you will need to divide them in the event of a divorce. You can agree to divide these as part of your settlement, or a judge can divide them if your divorce goes to trial. In order for the division to be binding on the plans, however, you will need a qualified domestic relations order (QDRO).

A QDRO (pronounced “quadro”) is an order by the court instructing your retirement plan administrator or custodian to divide the account without creating a taxable event. That is to say, most retirement accounts are tax deferred, meaning that you don’t pay taxes until you begin withdrawing money at retirement. If you withdraw the money before you reach retirement age (59-1/2), you have to pay all the taxes that were deferred.

Suppose you and your ex agreed to divide the existing balance of your 401(k) 50/50. If you were simply to withdraw half the money and deposit it into your ex’s account, you would owe taxes — along with an early withdrawal penalty, if you’re under 59-1/2 years of age. Those taxes and penalties can really add up, substantially depleting the money.

In order to avoid a taxable event, your spouse’s half of the money needs to be transferred directly from your 401(k) into another qualifying retirement account. This must be done by the plan administrator, who is not authorized to do so unless you provide a QDRO.

Your QDRO should be submitted to the plan administrator before your divorce is final

This is an issue that many people overlook. Your plan administrator or custodian needs time to review the QDRO to ensure it complies with your retirement plan’s terms. If it does not, you will need to revise it.

Ideally, you will submit your QDRO to the plan for a compliance review before you ask a judge to make it into a court order. If you wait until after your divorce is finalized, learning that the QDRO doesn’t comply with the plan’s terms becomes a real problem. You would have to revise the QDRO and then go back to court to have the court order amended.

Your divorce attorney can help you understand the specifics of your individual situation. In some cases, they may bring in outside financial experts to assist you in the division of complex assets, but most experienced divorce attorneys can help you equitably divide retirement accounts.