Question: I’m 56, and coming to end of a two-year divorce process that includes the division of our home, bank accounts, IRAs, and my husband's pension and 401 (k). My lawyer tells me to expect another six to eight months because he has yet to contact my husband's employer about the qualified domestic relations orders to set aside my part of his pension and 401 (k). How can I get things moving faster, and what about my share of his IRAs? Will I have to pay income taxes when I get the IRA’s?

Answer: Unlike qualified plan benefits, IRAs do not have to be payable pursuant to a QDRO. By a court order requiring a trustee to trustee transfer, your portion of your husband’s IRA’s can be transferred to an IRA account you establish with your bank or brokerage house. In this way, the transaction is free of income tax liability to you and your husband -- until you begin taking distributions, at which time you will be assessed income taxes. However, if your husband’s IRA is not rolled over into your IRA directly and comes directly to you, you will be required to report the entire IRA payment as income and pay both taxes and a penalty unless you fall within certain exceptions, which is beyond the scope of this column.

On the other hand, Qualified Plan Benefits can only be paid according to a Qualified Domestic Relations Order ("QDRO"), which determines who will be taxed on the distributions. As your lawyer should know, getting a proper QDRO prepared can be both time-consuming and expensive because it must be agreed upon by the attorneys and approved by the plan administrator and by the court.

Since all plans are not the same, your lawyer should have obtained a copy of the Plan Document and the Summary Plan Description from the Plan Administrator early in the case, and should have carefully reviewed the documents. One of the most common reasons an order fails to be a QDRO is because it provides for a type of benefit or option that is not authorized by the Plan. Wording that works for one plan may not necessarily work for another.

In addition, the drafter of the QDRO should not forget to include the basic requirements necessary because, if any are not included, the order will fail. These requirements include: (1) The name and the last known mailing address of the participant and each alternate payee covered by the order; (2) The amount or percentage of the participant's benefits to be paid by the plan to each alternate payee, or how to determine the amount or percentage; (3) The number of payments or the period to which the order applies; and (4) The plan or plans to which the order applies.

It is important to make sure the Plan Administrator receives exact instructions about the Payment of Benefits to the Alternate Payee that comply with the terms of the plan, including timing, amount, and method of payment.

At a minimum, your lawyer should have put the Plan Administrator on notice early in the case and should have been working on this order so as to avoid a last minute rush that causes mistakes. Because your husband’s attorneys should be more familiar with his plans than your lawyer, it may be a good idea to see if the Court will place the QDRO responsibility on them, rather than your lawyer.

Question: My wife and I are divorcing. We have been thinking about my transferring part of one of my IRA's to our 18-year-old daughter so that she can have tuition money when she goes to college. My lawyer tells me that it seems like a good idea and that, so long as my wife agrees, he sees nothing wrong with this. I have asked around, and haven't found anyone who has done this. Do my wife and I have a great idea, or is there something we don't know?

Answer: The latter. We suggest that you run your idea by your certified public accountant because, we're afraid, you are about to make an expensive mistake. As we understand it, if your IRA is transferred by court order to a non-spouse, such as a child, you will be, in effect, assigning income and will be hit with income tax on the total amount of the IRA. The fact that you couldn't find anyone else who had done this is understandable. Surely, if it were that easy, everyone would be doing it.