Retirement Accounts in Divorce

Retirement accounts are often one of the most valuable assets, aside from the family home, that must be handled in a division of community property in a California divorce. Determining how to divide this asset can be a complicated matter based on the type of pension plan or retirement account involved. While dividing assets right down the middle in an even split sounds simple, it is complicated not only by the type of account but tax consequences and the other individual circumstances of the couple as well, including the emotional state of each party and what they consider to be “fair.”

If you are facing a divorce in Orange County and need legal help in handling a fair division of marital property or any other issue, turn to Burch Shepard Family Law Group. Our firm has more than 100 years of combined legal experience, leadership from Certified California Family Law Specialists, and an outstanding record of success. We confidently represent the rights of individuals and families throughout Orange County when facing any legal issue falling under the umbrella of California family law.

Looking for trusted and proven legal representation? Call us at (949) 565-4158 for a free case evaluation today.

How Retirement Plans May Be Divided

Retirement plans, like 401(k)s and other plans are considered marital/community property in a California divorce. What this translates to is that the nonparticipant spouse (spouse who did not earn the benefits of the plan) is entitled to half of the value of the plan that has accumulated over the life of the marriage. This holds true even if the nonparticipant spouse was never part of the workforce.

Retirement accounts can include:

  • 401(k) accounts
  • Employment-based plans, such as IRAs and SEP-IRAs
  • Family-owned business-funded plans
  • Private employment plans, such as IRAs and Roth IRAs

As an example, let’s say that Spouse A worked 1,000 months with a 401(k) plan in place. 750 of those months occurred while married to Spouse B who did not work. 750 months translates to three quarters of the total months worked which would entitle Spouse B to receive three-quarters of the plan’s value when they divorce.

If you and your spouse can agree on how to divide a retirement plan during divorce, you can submit your agreement to the court. Generally, whether through mutual agreement or by order of the court, the nonparticipant spouse obtains the plan’s disbursement at the same time as the participant spouse which would occur when retirement takes place. Another agreement that could be implemented is for the whole value of the plan to go to the participant spouse with the nonparticipant spouse receiving a “equal” amount in some other type of marital property.

Qualified Domestic Relations Orders (QDROs)

Another factor in splitting retirement accounts is the need for a qualified domestic relations judicial order. These are entered into the divorce proceeding relating to the marital property division of retirement plans. These orders are created to recognize joint interests of both parties in the value of this particular asset to ensure that the nonparticipant spouse gets his or her share of the plan’s value. In the plan, specific instructions are given to the retirement plan administrator as to how the plan will be split.

A QDRO is not needed for every retirement plan. For example, it is not needed for IRAs, military pensions, certain government plans, or deferred annuities. But it is necessary for 401(k)s and other types of retirement plans. QDROs need to be tailored to the particular plan involved and must meet specific legal standards. For this reason, they should be prepared by a family law attorney who understands them and who has experience in drafting them.

Turn to a Trusted Legal Source in Orange County

At Burch Shepard Family Law Group, we are prepared to represent you with compassion and vigor. Our primary goal is to do everything possible to help you achieve a favorable outcome while we zealously protect your legal rights. No matter how complex your divorce or other family law issue may seem to be, our legal team has the superior knowledge, experience, and drive to provide the outstanding advocacy you need and deserve at such a critical time.

Contact us at (949) 565-4158 to get started today.