If you’re having an amicable divorce, you might be tempted to think you can just split all your assets and go your separate ways.

Not so fast…

DIY divorces that attempt to parcel out retirement plans like 401(k)s or pensions are apt to run into a lot of trouble.

Why every DIY divorce needs a QDRO!

Ask a certified divorce financial analyst (CDFA) and they’ll likely have horror stories about the danger of couples trying to get divorced without a lot of legal entanglement while splitting up retirement assets.

But the dangers of doing this the wrong way in a DIY situation include hefty tax bill and penalties. Or worse, one ex-spouse could end up with nothing at all.

Reuters spoke with one CDFA who saw a higher-earning spouse take $250,000 out of a 401(k) to give to a lower-earning spouse as part of their DIY divorce agreement — and the higher earner got hit with taxes and penalties of $110,000 because it was done incorrectly!

Pensions are particularly trick to split up because each plan has its own rules. As just one example, Reuters notes that state pensions in Massachusetts forbid the spouse owed a part of the pension from collecting any funds after remarriage.

Here’s a real nightmare situation involving pensions: Let’s say the spouse with the pension dies shortly after the divorce is finalized, yet before a critical next step was taken. In that case, the surviving spouse could get nothing.

What is that critical next step, you ask? What is the magic bullet here that can at least try to limit the financial damage related to retirement accounts when a marriage comes apart but it’s a largely amicable breakup?

The key to avoiding scenarios like the ones mentioned above is to have a qualified domestic relations order (QDRO) completed and signed by both spouses before moving ahead with the divorce.

What is a QDRO?

Fidelity Investments has an FAQ site for QDROs that explain them like this:

“A Qualified Domestic Relations Order (QDRO) is a court-approved order that assigns all or a portion of a Plan participant’s (the Participant) Tax Qualified retirement plan benefits to a spouse, former spouse, child, or other dependent (the Alternate Payee). QDROs are permitted for three reasons: to divide marital assets in a divorce or separation, to pay alimony, or to provide child support.”

What does a QDRO contain?

QDROs are pretty straightforward, but very important. Fidelity says they typically contain basic info such as:

The name of the plan
Name and last known mailing address of the participant
Name and mailing address of alternate payee
Amount to be paid; the manner in which such amount is to be determined; and the number of payments to which the order applies
Other plan-specific info may be necessary — check for additional requirements in a Plan's QDRO rules and procedures.

Who is best qualified to write a QDRO for you?

You can get referrals to qualified people through the American Association of Certified QDRO Professionals. They can connect you with a reputable Certified QDRO Specialist (CQS) or Certified QDRO Analyst (CQA) in your area.

Drafting a QDRO is not the kind of job you want to entrust to a general family law attorney, according to Reuters.

How much will a QDRO cost?

You should be prepared to pay anywhere from $500 to a few thousand dollars for a QDRO.

Do this, don’t do that, when it comes to drafting QDROs

The best way to proceed with getting a QDRO in place is have your CQS or CQA ask your retirement plan sponsor for their model QDRO agreement. Then they can make any tweaks as necessary based on your state laws when drawing up a QDRO.

The wrong way to proceed, according to Reuters, is to have your preparer make a draft blindly in anticipation of additional input and revisions from the retirement plan custodian. Doing it this way can cost thousands of dollars or more when language has to be changed.