10/21/2011 11:35 am ET | Updated Dec 21, 2011

I Stayed Home to Raise Our Kids While My Ex Earned Retirement Benefits

Years ago, before you had kids, you and your spouse agreed that you would stay home while the kids were young, and your spouse would continue to work outside the home. There were plenty of good reasons to do this -- it made sense for your family. Now, though, as you are going through your divorce, the world looks very different. You are questioning this decision, along with so many others that you made during your marriage (and, likely, before your marriage, too -- like getting married to your spouse in the first place).

Suddenly, your future seems incredibly insecure. While you were at home, your spouse's career advanced. But when you try to find a job, your career will likely have taken a big step back -- you may even be looking at entry-level positions, competing with young graduates for jobs. Also, your spouse has been earning retirement benefits in a pension plan, a 401(k), or both. The nest egg that you thought the two of you were building together is now entirely in your spouse's name, and you may be worried about how you will support yourself when you are not able to work any more (assuming you can even find a job after the divorce).

There may be many four-letter words that your circumstances bring to mind, but one that you should learn is "Q-D-R-O." A QDRO is a "Qualified Domestic Relations Order," and it is a term that you will become familiar with during your divorce if there are retirement benefits to be divided. A QDRO will be needed to provide you with a portion of the retirement benefits earned by your spouse during the marriage.

In every state, retirement benefits earned by one spouse during the marriage are considered marital property to be divided. The rules about how it is to be allocated between the spouses will vary depending on the state, but the benefits earned during the marriage are part of the assets that can be divided between the spouses in a divorce. The QDRO is the vehicle that will require the employer to make payments to the non-employee spouse as a result of the divorce. This is true for both 401(k)-type retirement plans (which have an account balance with a current cash value), or a traditional pension plan (which usually make monthly payments of a set amount in the future at retirement). It is true even if the spouse has already retired and started receiving monthly benefit checks from the employer.

Although it seems like this would be a very simple, straightforward process, the truth is that the QDRO is often the most complicated part of the divorce. Most people who end up needing a QDRO are stunned to learn how complex this can be. I've already written about some of the problems that can arise, even in a very simple 50/50 split of a 401(k). This is just the tip of the iceberg. I've worked on cases that have become such a complicated mess that they have taken thousands of dollars and years to resolve, draining the parties' assets even more than the divorce itself.

For spouses who have not been in the work force during the marriage, the stakes could not be higher. For some spouses, the retirement plan is going to be their main source of income after the divorce, and they have little prospect of earning enough money in the work force to support themselves. Getting the QDRO right can mean the difference between a secure retirement and a desperate financial situation.

If you are in this position, you need to protect yourself. Make sure you have complete information about your ex's retirement benefits, and that your lawyer knows how to divide them properly. This is literally an area where one innocent-seeming word in a sentence can change the meaning of the QDRO -- and make the difference between a comfortable post-divorce retirement and a nightmare. I have seen cases where a word or two (such as dividing the "vested benefit" instead of the "benefit" or stating that the "marital portion" will be divided instead of the entire balance) has made a difference of hundreds of thousands of dollars (not even counting the extraordinary legal fees spent trying to fix the problem).

We don't get too many chances to learn new four-letter words as adults. Take this opportunity to add "QDRO" to your vocabulary, and make sure you don't end up shouting other four letter words in the future.