When a couple divorces, pensions and other retirement accounts are often significant assets of the marriage. Especially when one spouse was the primary breadwinner and the other contributed more to the family as a caregiver to children or household manager, division of retirement assets can be especially important.
Pensions, 401(k)s, IRAs and the like are usually marital property
Marital assets are subject to division in a dissolution of marriage proceeding. A simple definition of a marital asset is anything either spouse earned or acquired during the marriage except inheritances or gifts to either party from other people. Property either person got before marriage is their own separate, nonmarital property – so not subject to distribution in divorce.
Pensions and other kinds of retirement accounts are marital if they were earned or accrued during marriage. Retirement funds earned before or after the marriage usually belong to the earner alone.
Parties to a divorce may be able to negotiate a marital settlement agreement in which they contract how to divide their retirement assets. If they cannot reach an agreement, the judge must determine what an equitable division would look like. Equity emphasizes fairness rather than an exact division down the middle of an account. Plus, equitable division analysis looks at the entire marital estate and what is fair overall. For example, one spouse may keep their pension and 401(k) while the other gets the residence and other investments.
QDROs and valuation
Retirement assets can be tricky to evaluate. They are usually payable in the future, subject to conditions and financial or professional decisions as well as to financial growth (or loss) over time. Determination of accurate present and future valuations on which to base fair division may require complex algorithms or data analysis. This may require the use of financial experts’ opinions in the divorce proceedings, especially if there are valuation disputes.
Should the court decide that a pension or other retirement plan should go in part or whole to the spouse who did not earn it, it normally must issue a qualified domestic relation order (QDRO). This is a court order that allows the administrator of the plan to pay out benefits in the future to the nonearning spouse. QDROs can be financially complicated and must comply with federal law.
The QDRO also directs how the administrator is to determine the amount to pay out. For example, the judge may decide to calculate the value as of the date of the divorce filing and award a certain percentage of that amount to the other party at a future date.
Takeaway
An experienced Florida family lawyer can provide informed guidance and representation in matters of retirement plan division in a dissolution of marriage proceeding.
