There are many aspects of a divorce that are quite easy to figure out, such as splitting personal property. You know the assets that you have, and it is simply a matter of splitting them up evenly. However, things get a bit tricky when you need to split up things that don't have a clear value, such as retirement and pension accounts. Here is what you should know about navigating the problem.
Know What Are Retirement Assets
It's crucial to know what retirement assets need to be divided during a divorce. Even though you may not have seen a dime from a pension plan at the time you are getting a divorce, the benefits will need to be appropriately divided once it is received. There are also contribution plans, such as 401(k) or an IRA, which accumulate funds based on employer or personal contributions. These are all up for division during a divorce.
Know Your State Distribution Laws
Your state will use community property or equitable distribution laws to handle retirement income. If you live in a community property state, all of the retirement assets obtained during a divorce are community property and must be divided fairly. Equitable distribution states are a bit different, where retirement assets are divided with fairness in mind.
Community Property Law Example
Here is an example of what dividing a pension may look like in a community property state. Consider a couple that is married for 15 years, and the wife earns a pension and plans on retiring after 30 years of working. This means that the couple was together during half of the wife's employment where she earned a pension, and the husband would then be entitled to half of the pension earned while they were married. Community property laws may allow for the husband to receive 25% of the pension once it is distributed, and the wife receives the remaining 75%.
Equitable Distribution Example
There are many more factors that go into dividing retirement in an equitable distribution state, so there is no formula for what would be fair without using a very specific example as a situation. However, things like how long a couple was married, each person's contribution to the marriage, and their financial circumstances are all considered when dividing a pension. The goal is to provide fair distribution of pension benefits so that one partner is not left without any money for retirement.
However, a judge may consider a different split in cases where adultery took place during the marriage. The innocent spouse may end up receiving more than their fair share to make up for the misconduct. For more information, contact a firm like Brabazon Law Office, LLC.