Dividing Retirement Benefits in Divorce
One of the biggest challenges in divorce is the division of retirement benefits. People often have an emotional attachment to this type of property as they have worked hard to earn it. Therefore, it is important that both parties be clear on what is considered community property and what is not. Although you may not be able to receive benefits from your pension plan until you reach retirement age, your plan can be divided years before your retirement because of a divorce.
It is important to keep in mind that the family law court can split pensions and other retirement plans the same way they can split other types of property. However, retirement plans usually require additional paperwork to legally split them. Dividing pension and retirement benefits present special challenges that require a thorough understanding and legal advice from a California family law attorney.
Community Property vs. Non-Community Retirement Benefits
It is important to determine which retirement benefits are considered community property. Accrued or vested retirement benefits are community property and need to be divided in a divorce. Other retirement benefits that fall under community property include:
- Military pensions
- Veteran’s educational benefits
- ERISA funds
- Employee Stock Option Plans (ESOPS)
- 401K and 403K plans
Retirement benefits not classified as community property cannot be divided among the parties. This includes social security payments, compensation for military injuries and worker’s compensation disability awards.
Regardless of the length of marriage, all available retirement benefits need to be discussed and settled in a fair manner. Generally, a spouse should not waive retirement benefits unless that spouse’s share is not worth much.
Splitting Up Retirement Benefits
When dividing a retirement account there are some specific considerations. A Qualified Domestic Relations Order (QDRO) is used to transfer a share of retirement funds from the spouse to the other spouse. A qualified family law attorney can ensure that you are well-informed on your rights regarding QDROs. Divorcing parties can split retirement benefits in two ways:
- A present-day valuation buy-out.
- A division into two accounts.
Negotiating retirement benefits can be challenging. A California family attorney can explain which retirement benefits you are entitled to and what amount is a fair settlement. If the retirement benefits are substantial, it is best to get legal advice from a family law attorney in regards to valuation and ethical considerations in handling and the preparation of QDROs. Additionally, an attorney may be required who specializes in employee benefits, tax law and the preparation of QDROs.