Dividing pension and retirement accounts in divorce | lorona mead
Pensions and various retirement accounts are valued and divided in divorce. Just as the income you and your spouse earned during the marriage is part of the divisible marital estate, so are the retirement and pension account values vested at the time of the divorce. While family law rules impose rights to shares of retirement assets, the parties in a divorce can use their rights to offset other property or asset division. In a settlement agreement, the parties may want to agree that one spouse keeps their full retirement account and pension interests and the other may be allowed to keep the home, free and clear, for example.
However pension and retirement assets are to be divided, it is important to properly value and follow applicable law on retirement and pension division. It is important to speak with an experienced attorney such as the family law attorney Phoenix locals trust.
When dividing marital assets in divorce, vested pensions and future payments are valued, divided and assigned to each spouse in settlement of by the court’s order. If the parties agree that one spouse should keep their full and undivided pensions, the bargain for exchange should be written in the divorce settlement agreement. When pension accounts are to be divided, the court’s order will set forth the required payments or shares to divided among the parties. A Qualified Domestic Relations Order (QDRO) is required by law and is a separate order which identifies a date for payment, parties to pay, and a lump sum or monthly percentage of pension payments.
Qualified Retirement Accounts
Like pensions, retirement accounts such as 401(k) accounts are joint marital assets and require a QDRO for division in divorce. The order states a specific amount or lump sum payment instructions. Note that not all retirement plans are subject to the QDRO requirement, which applies only to qualified retirement plans covered by the Employee Retirement Income Security Act (ERISA).
Individual Retirement and SEP Assets
If you have an IRA account, it may be treated like any other investment account asset and there is no additional requirement that a QDRO be used to divide it. This is a perceived benefit of an IRA when the limits of transferability are concerned. A Simplified Employee Pension (SEP) IRA, commonly found in small and solo employee businesses, is not a pension plan within the meaning of ERISA which imposes the QDRO requirement.
When dividing pension and retirement accounts, every pension and retirement account plan administrator may have their own rules and procedures in complying with court-ordered divisions in divorce cases. It is important to seek the advice of an experienced divorce attorney experienced in all areas of divorce including pension and retirement account division.