YOUR RIGHTS TO RETIREMENT ASSETS
When couples marry, “what’s mine is mine” and “what’s yours is yours” becomes “ours.” They begin earning, spending, and saving together to build a future. If they choose to divorce somewhere down the road, what they own together must be divided, and that process is not always easy.
If you are thinking about divorce or have received a divorce petition, you may be wondering what happens to what you have saved as a couple for retirement. Since those assets are often built using income earned from employment, it may appear that they belong to the person who earned them. That can be a concern for your future.
At The Law Offices of Steven E. Springer, we represent clients in San Jose, Morgan Hill, Fremont, Hayworth, and Pleasanton, California, as well as in Alameda and Santa Clara counties. As family law attorneys, we help them sort through the complexities of property division during divorce. That includes what happens to those retirement assets.
HOW IS PROPERTY DIVIDED IN CALIFORNIA DIVORCE?
California is a community property state for divorce. Couples may have separate property, which are assets and debts they acquired before the marriage, and community property, which are assets and debts acquired during the marriage. Community property is divided equally in divorce.
Although this may appear to be straightforward, there are multiple factors used to determine what is and what is not community property, or “marital property,” and what the value of the property is so it can be divided in a 50/50 split.
California also uses an arguable deadline to determine when assets cease to be marital ones. Marital assets don’t end as of the date of divorce. Instead, once one spouse asks for a divorce, they both agree to divorce, or one moves out of the house, any assets or debts they acquire as of that date are separate property, not marital.
HOW DO RETIREMENT ASSETS FIGURE INTO THE EQUATION?
Between what is separate property and what is marital property are shades of gray. Some property, such as retirement assets, is usually both separate and community property.
For example, each spouse might have been building a retirement account prior to the marriage. That separate property would have a certain value as of the date of the marriage. Thereafter, and until the date the couple decides to divorce, those assets would be marital property.
The value of retirement accounts as of the date of marriage, including the money put into the account and the interest it earns, is community property and should be divided equally between the spouses in a divorce.
If the only retirement asset is a 401(k) or Roth IRA, determining the value that is separate property and the value that is community property might not be that difficult. However, sorting out other types of retirement assets can be infinitely more complex.
Retirement assets would include traditional retirement plans such as an IRA, a retirement annuity, and 401(k) plans. They also include savings accounts, government and military pensions, and defined benefit and defined contribution plans.
Whether a spouse is entitled to a share of the other spouse’s military pension, for example, depends on the number of years of active duty and the overlap with the number of years of the marriage.
DO I NEED A QUALIFIED DOMESTIC RELATIONS ORDER?
A qualified domestic relations order (QDRO) is a way for a spouse to protect their rights to retirement assets in a California divorce. Federal laws prohibit paying benefits to someone other than the employee contributing to and earning the retirement benefit. The QDRO is necessary to allow payment of the community property share of retirement assets to the non-employee spouse.
QDROs are necessary to divide certain retirement, pension, stock option, and tax-sheltered annuity plans. Without one, the non-employee spouse cannot gain their fair share. Moreover, QDROs must be drafted to address the specific subject retirement asset, which means they should be drafted by an attorney who has experience doing so.
Just as there are tax ramifications of cashing in retirement accounts, there are tax ramifications for a spouse receiving a retirement asset payout as part of a divorce. You should work with a knowledgeable attorney to take steps to avoid tax penalties.
DON’T RISK YOUR FUTURE. CALL TODAY.
Spouses have a right to retirement assets in a divorce, but ensuring you get what you are entitled to can be extremely complicated. Don’t forfeit your rights. The marriage may be ending, but you still have a future riding on your retirement.
Let The Law Offices of Steven E. Springer in San Jose, California, help you keep what you deserve. Call us now to schedule a time to visit.