Money Lost! Waiting Too Long to Enter Your QDRO, After Divorce

There is an old legal maxim, "Those who sleep on their rights shall lose them."  Or in the modern vernacular, "You snooze, you lose."  That is very true in terms of a spouse's right to receive pension or other retirement benefits, post divorce.  Fortunately, it isn't common.  But when it happens, it is too late to do anything.  So be forewarned.

QDRO is an acronym for "qualified domestic relations order."  These orders relate to retirement accounts covered by the Employee Retirement Income Security Act of 1974 (ERISA).  They are used in a divorce to disburse the "marital portion" of one spouse's retirement accounts to the other spouse.  (The "marital portion" is the amount contributed from date of marriage to date of divorce.  For more information on QDRO's, click here.)  Personally, if I were going to get half of someone's pension or 401(k), I would be the first one to rush to the QDRO preparer to make sure it happens.  Money you don't have to work for, is good.

But there is the occasional straggler who waits.  Not days, or months, but years.  Not one or two, but ten years or more.  And that's where they run into trouble.  Because there is a statute aimed at dealing with such procrastinators - not only in divorce, but for any judgment - which says that a judgment is unenforceable after 10 years.  The statute is MCL 600.5809(3), which states that “the period of limitations is 10 years for an action founded upon a judgment or decree rendered in a court of record in this state.”

This is a statute of limitation, just as there are statutes of limitation for contracts, tort claims, and adultery, among other things (the statute for adultery is only one year, by the way).  Although it may seem unfair to the person trying to claim, the point is that if someone has a claim, they need to act on it.  The policy behind statutes of limitation is to promote the prompt resolution of claims, and penalize lazy claimants.  Life is uncertain enough.  People are entitled to have a certain amount of security in their life, that something they did in their 20's can't come back to haunt them in their 80's.

In one case I had, a former spouse tried to get a QDRO entered, ten years after the divorce.  I couldn't believe it.  Then, in another case, a claimant came after 14 years, trying to enter a QDRO.  I asked her lawyer, why had she waited so long?  He said it was because her ex-husband (my client) refused to pay his half of the QDRO fees, and she didn't want to pay it.  The QDRO fee was $250 each.  So, to avoid paying $250, she sat and did nothing for 14 years, when thousands of dollars in pension benefits were at stake!  

Don't let this be you.  If you are awarded pension or other retirement benefits in a divorce that require a QDRO, act on it immediately.  Some people don't realize that there are times when QDRO's themselves take up to a year to be entered and approved by the Plan administrator.  Don't be penny wise and pound foolish.  Get it done today, even if you have to pay the cost yourself.  The benefits will be well worth it.  And if you lose it, you will be kicking yourself over the loss for years to come!