What happens to your pension or retirement in a divorce?

Have you acquired a pension or retirement account and are wondering what might happen to it in a divorce? Common retirement assets in a divorce include a pension plan, 401(k) and IRAs. As pensions have become less common, the shift to 401(k) plans has pushed employees to become responsible for both the risks of investment and saving for retirement. Generally, a retirement asset that is acquired during marriage is considered community property to the extent it is acquired during the marriage. This means that a retirement asset would be subject to division during divorce. If the retirement asset, or any portion thereof, was acquired prior to marriage or after separation, it would be considered separate property and that portion would not need to be shared with the other party.

California courts divide retirement plans by the Time Rule formula. Under the Time Rule formula the benefits are community property in the ratio that the time worked between the date of marriage to date of separation bears to the entire time of employment. Marriage of Judd (1977) 68 CA3d 515,522. The remaining portion of the benefits (i.e. in the ratio that the time worked before the date of marriage or the after the date of separation bears to the entire time of employment) is the participant’s separate property interest.

Parties typically divide retirement plans via a QDRO (qualified domestic relations order). A QDRO is a specialized court order which divides the community interest in the account to each party while allowing the parties to avoid negative tax consequences for dividing the retirement account.

If you have questions about what happens to your retirement plan during the divorce process, please call Morales Law for a complimentary consultation. THIS IS NOT LEGAL ADVICE. Factual circumstances will vary and require specific procedures. We are Santa Barbara Divorce Lawyers. This is for informational purposes only and should not be relied prior to, or in place of, consulting with legal counsel. Morales Law can be reached at (805)-422-7966 or at www.mysantabarbaralawyer.com.

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