When a marriage ends and property must be divided among spouses, one of the things rarely considered is the distribution of retirement benefits. Much like with the distribution of debts, some ex-spouses may be startled to find that they must share retirement benefits as well. Even if only one spouse was working at the time, if they earned benefits during the marriage, those benefits become marital property. Marital property includes anything gained or earned during the marriage, and things like pensions, 401K accounts, IRAs, and other retirement benefits will be factored into an equitable distribution if they were earned upon during the marriage.
Dividing Retirement Benefits
When it comes time to divide retirement benefits between spouses, the court will use the same method of equitable distribution that is used for division of other property. Equitable distribution refers to the "fair," but not necessarily equal, distribution of property and benefits between the two spouses. When dealing with intangible assets, distribution can be somewhat difficult to measure. This is especially the case if the spouses are divorcing long before they intend on retiring. A common strategy employed by the court is to postpone the distribution of this particular benefit until it is matured and can be paid in whole to the other spouse. In some cases, another option is for the spouse who earned the benefit to keep the benefits, but, in turn, they must exchange an asset of equal value in order to retain ownership of the benefits.
If one of the spouses has a pension, it will still be divided among the two spouses upon divorce, so long as it was earned upon while the spouses were married. Regardless of what type of pension existed, it will still be split between the spouses through equitable distribution.
The division of retirement benefits normally occurs alongside or during the same phase as the division of marital property. Some spouses may not want to leave their retirement accounts up to equitable distribution through the court. Instead, spouses may opt to work out a settlement between one another to prevent a lengthy equitable distribution process. Settlements can simplify the lengthy divorce process, and ensure that both spouses are able to express their needs for how property and debts should be divided.
Does Dividing Retirement Benefits Affect Support?
Decisions regarding pensions and other retirement benefits do not typically impact child support, however, they may have some impact on alimony and spousal support. Pensions do not count as income, but they are factored into a spouse's financial status when making determinations for child support or spousal support. Benefits will be considered differently for child support and alimony, depending on the case.
Dividing retirement assets and benefits can become particularly complicated, especially if there are multiple retirement accounts to be factored into an equitable distribution. If you or a loved one is involved in an equitable distribution case, contact attorney Joseph D. Lento today.