How will the Courts handle processing for an IRA Distribution?

Full question:

How will the Courts handle processing for an IRA Distribution as ordered in a QDRO from 9 years ago if the Petitioner never properly distributed from his IRA into the Respondent's name as directed and now he claims that he already cashed it out?

• Category: Divorce
• Subcategory: Property Settlements
• Date: 04/07/2025
• State: Minnesota

Answer:

How the court will determine the matter depends on all the facts and circumstances involved. If the IRA is an account under a pension plan, Congress conditioned an alternate payee’s right to an assignment of a participant’s pension benefit on the prospective alternate payee’s obtaining a domestic relations order that satisfies specific informational and other requirements. Congress intended prospective alternate payees to have access to plan and participant benefit information sufficient to prepare a QDRO. Such information might include the summary plan description, relevant plan documents, and a statement of the participant’s benefit entitlements. Upon receipt of a domestic relations order, the plan administrator is required to promptly notify the affected participant and each alternate payee named in the order of the receipt of the order and to provide a copy of the plan’s procedures for determining whether a domestic relations order is a QDRO. Notification should be sent to the address included in the domestic relations order. The administrator is required to determine whether the order is a QDRO within a reasonable period of time after receipt of a domestic relations order and to promptly notify the participant and each alternate payee of such determination.

Every pension plan is required to establish written procedures for determining whether domestic relations orders are QDROs and for administering distributions under QDROs. Laws provide that each person specified in a domestic relations order received by the plan as entitled to payment of benefits under the plan will be notified (at the address specified in the domestic relations order) of the plan’s procedures for making QDRO determinations upon receipt of a domestic relations order; and A description of the steps the administrator will take to protect and preserve pension assets or benefits upon receipt of a domestic relations order (for example, a description of when and under what circumstances plan assets will be segregated or benefit payments will be delayed or suspended)

Plans are required to adopt reasonable procedures for determining the qualified status of domestic relations orders. Compliance with such procedures should ensure that determinations of the qualified status of an order take place within a reasonable period of time.

During any period in which the issue of whether a domestic relations order is a QDRO is being determined (by a plan administrator, by a court of competent jurisdiction, or otherwise), ERISA requires that the plan administrator separately account for the amounts that would be payable to an alternate payee under the terms of the order during such period if the order had been determined to be qualified. These amounts are referred to as “segregated amounts.” During the period in which the status of a domestic relations order is being determined, the plan administrator must take steps to ensure that amounts that would have been payable to the alternate payee, if the order were a QDRO, are not distributed to the participant or any other person. The plan administrator’s duty to separately account for and to preserve the segregated amounts is limited in time. ERISA provides that the plan administrator must preserve the segregated amounts for not longer than the end of an “18-month period.” This “18-month period” does not begin until the first date (after the plan receives the order) that the order would require payment to the alternate payee. The plan administrator also has a fiduciary duty to pay out benefits in accordance with the terms of the QDRO.

If the ex-spouse has filed for bankruptcy, claiming the payments to be a dischargeable debt, the obligee spouse must apply to the bankruptcy court for a determination that the obligation is not, in fact, subject to discharge by establishing that it is a divorce-related debt.

On the request of either party or on the court's own motion, a court ordinarily may render an order clarifying the division of property made in a decree. A clarifying order may be useful, for example, when a change of circumstances not contemplated in the decree requires one of the parties to take specific actions not mentioned in the decree in order to carry out the property division. Also, a clarifying order may be necessary to make the decree specific enough for enforcement by contempt. In this connection, the Family Code authorizes a clarifying order to be made either (1) before a motion for contempt is made or heard; (2) in conjunction with a motion for contempt; or (3) on denial of a motion for contempt.

If a divorce decree divides retirement benefits but does not provide a qualified domestic relations order (QDRO) or similar order permitting the payment of benefits to an alternate payee or other lawful payee, a party may request that the court render a QDRO or similar order. And, when the original decree attempted to permit direct payment of benefits but the plan administrator determined that it does not meet the requirements of a QDRO, the court has jurisdiction to render an amended or corrected decree that will qualify as such.

Any party who has not received payments of money as awarded may petition for a judgment against the defaulting party for the amount of unpaid payments. This remedy is in addition to any other remedies provided by law.

Courts are statutorily empowered to enforce their orders by contempt. However, the authority of a court to enforce its orders by contempt is an essential element of judicial independence and authority and does not depend on statutory authority.

An order to deliver specific property or an award of a right to future property may be enforced by contempt. However the court cannot invoke contempt to enforce an award of a sum of money in a decree of divorce, whether payable in a lump sum or in future installments in the nature of a debt, unless the payment is of a fund in existence at the time of the decree.

Civil contempt, or coercive contempt, is imposed when a court imprisons the contemnor until the person performs certain acts required by the court. Civil contempt may not be imposed unless the contemnor has the present ability to perform the required acts at the time of the hearing. Criminal contempt, or punitive contempt, is imposed when the court fines the contemnor or imprisons the contemnor for a determinate period of time. Criminal contempt may not be imposed unless the contemnor had the ability to perform the required acts at the time they were required to be performed. In an appropriate case, the court may impose both civil and criminal contempt.

A court does not have the power to hold a party in contempt for a failure to pay a debt; such a contempt order would be void. In this context, a debt is an obligation imposed by a decree that requires a party to pay money to be earned in the future (except for child support payments). However, a present order to deliver specific, existing property or to pay all or part of an existing fund does not constitute a debt. For example, a divorce decree that awards a sum of money, payable in a lump sum or in future installments, is not enforceable by contempt, unless either:
· Payment is to be made from a fund that exists at the time of the decree; or

· The decree awards the right to receive installment payments or a lump-sum payment due on the maturation of an existing vested or nonvested right to be paid in the future

· The award is for temporary spousal maintenance, as when, following a long term marriage, a spouse lacks the ability to work and earn money to be self-support

Even if the property division itself is enforceable by contempt, interest charged for delays in paying or delivering property is considered a debt and may not be enforced by contempt. Similarly, the court may not use contempt to enforce the payment of tax liability, since tax liability is a personal obligation constituting a debt.

Attorney's fees and court costs awarded in the divorce proceeding generally are not enforceable by contempt due to the prohibition against imprisonment for debt. However, if the attorney's fees or court costs were made payable out of property in possession of a party at the time the order was made, contempt is an available remedy.

Contempt proceedings may be criminal in nature. A person charged with contempt of court should have the privilege against self-incrimination, the right to notice of the charges and possible punishment, the right to trial by jury, and, if indigent, the right to counsel. While these rights are clearly established by statute and case law for the person accused of failing to pay child support, their application to contempt proceedings involving property awarded in divorce has not been clearly defined.

Please see the information at the following links:

http://definitions.uslegal.com/c/contempt/
http://definitions.uslegal.com/q/qualified-domestic-relations-order-qdro/
http://lawdigest.uslegal.com/family-laws/divorce,-separation-and-annulment-overview/
http://definitions.uslegal.com/e/employment-erisa/
http://www.retirementplanblog.com/DOLqdronet01.pdf

Please see the forms at the following links:

http://www.uslegalforms.com/mn/MN-DIV1402.htm
http://www.uslegalforms.com/us/US-01470BG.htm
http://www.uslegalforms.com/mn/MN-8426D.htm
http://www.uslegalforms.com/mn/MN-DIV1401.htm
http://www.uslegalforms.com/mn/MN-DIV1402.htm
http://www.uslegalforms.com/mn/MN-DIV1405.htm
http://www.uslegalforms.com/mn/MN-8315D.htm