- Retirement Accounts
To the extent that retirement benefits (401(K) plans, 403 (b) plans, IRAs, annuities, pensions, and 457 deferred compensation plans, profit sharing plans, ESOP plans, and/or military retirement plans) were accumulated during the marriage, those resources are considered community property and, as such, are subject to equitable (fair, not necessarily, but usually equal) division by the divorce court.
Where such retirement benefits partially pre-date the parties’ marriage, it is necessary to present evidence to demonstrate the pre-marital balance in such accounts in order to have that portion designated as the sole and separate property of the spouse who made the premarital investment.
In cases where both spouses accrued retirement benefits during the marriage, each is entitled to half of the increase of each plan over the course of the marriage.
There are many ways to affect the actual division of such accounts including offsets against other community assets, division orders, Qualified Domestic Relations Orders (QDRO), or simply liquidating the account(s), paying penalties and interest, and dividing the proceeds.
In cases where significant retirement assets exist, it is always advisable to consult with an attorney whose practice is focused upon this area of law to insure you are making a decision that is in your financial best interest. Proper valuation of retirement assets and a determination of which method of division results in the best outcome for your individual situation requires advice from a specialist. You should also consult your tax professional to insure that you understand the tax implications of your choices.
If a QDRO is determined to be the best approach for your situation, neither party’s attorney drafts that document, but rather both parties must either agree on a neutral, third-party attorney whose practice is focused on this area of law or they must ask the Court to appoint one.
For a list of several attorneys whose practices focus on the division of retirement assets and who routinely accept referrals to draft Qualified Domestic Relations Orders, please see my “Useful Links” page.