Divorce often involves the distribution of assets to each spouse. While some states divide assets fairly (equitable distribution states), a few are community property states, such as Washington, where all marital property is divided 50/50. One of the biggest personal assets you own may be your pension. Is your spouse entitled to a share of your upcoming pension checks?
Similar to other retirement accounts, such as 401(k)s, 403(b)s, and IRAs, a pension is considered to be a joint asset to the extent it was paid for by the holder’s earnings during the marriage.
However, there are some difficulties with dividing pensions. The exact value of the pension can be difficult to determine until it starts being paid out, usually upon the holder reaching a certain age. Furthermore, community property division does not apply to any portion of the pension earned prior to or after the marriage. And there may be tax or financial penalties for early withdrawal of assets from a pension plan.
These issues are generally resolved during a divorce through the entry of a qualified domestic relations order. A QDRO authorizes and directs the plan administrator to divide up the pension funds according to a formula and to place them in separate accounts without financial penalties.
Alternatively, if both spouses have their own retirement plans and they are of comparable worth, it may make sense for them to keep their own and call it even. And if their retirement accounts are not close in value, the spouse with the larger pension may offer the other spouse a greater share of joint marital assets instead of a pension split.
It is important to keep in mind that if you and your spouse signed a prenuptial agreement that protects your pension plan, it remains yours and yours only. Those individuals with a military or government pension may face a separate set of rules in terms of the division of the pension in a divorce.
If you contemplating a divorce and need advice about how community property division will affect your pension and other assets, the experienced family law attorneys at Bottimore & Associates, P.L.L.C. in Tacoma can help. To learn more or to schedule a consultation, call us at 253-272-5653 or contact us online today.