Retirement or pension accounts can be the most valuable asset that will need to be divided upon divorce. In some cases, retirement accountsmay be worth more than the marital home. Because California is a community property state, it is likely that both spouses have an ownership interest in at least part of the retirement or pension account. Dividing this interest is a complicated task, and likely should be handled by lawyers and financial professionals in order to protect your interests.
Steps in Dividing Retirement Accounts
Some types of retirement accounts such as 401(k)s or IRAs are fairly easy to value as the value of the account is reported in regular account statements. However, defined benefit plans, which are designed to make payments to the beneficiary from the start of retirement until the beneficiary’s death, can be more complicated.
In these types of plans, which includes corporate-sponsored pensions, the value should be determined by an actuary, who will look at a number of factors including inflation and risk associated with the account. It may be the case that both parties to the divorce retain actuaries who will be required to testify in court as to how they arrived at the valuation, leaving the final valuation up to the court to decide.
If the couple married after the account was opened, the other spouse’s ownership interest in the account would not be in the entire account, but rather a portion thereof. Contributions to such an account before the marriage are separate property.
What Is a QDRO?
A qualified domestic relations order (QDRO) is a document detailing how these accounts will be divided. With certain accounts, a QDRO will be required. This document must be approved by the court as well as the benefit provider. QDROs are highly technical documents that should be created by a legal professional because mistakes can be very costly.
Can You Keep Your Accounts?
Some people would rather see that retirement accounts remain in the ownership of the employee.
If both spouses have retirement accounts, it may be most equitable for each to retain their account upon divorce. However, even in this instance, both accounts should be valued. Sometimes, one spouse’s account will be worth much less than the other’s account over time, and that should be considered when dividing community property.
It may be possible that the account holder can retain his or her account and other community property can be used to offset the value. Typically, if parties agree to a settlement arrangement, the court will accept it.
Call a San Jose Property Division Lawyer
If retirement accounts or pensions are part of the community property in your divorce proceedings, a qualified divorce attorney can and should help. These are complicated matters involving high-dollar assets.
At the very least, you should understand the value of these accounts in your case. Contact the accomplished San Jose, CA property division attorney at Dominion Law Group, LLP at 408-288-5592 to understand more about how property division will work in your divorce.