Dividing Retirement Accounts in a Divorce Can Be a Complex Matter

The State of California follows community property rules when it comes to divorce. This means that any property that was acquired during the marriage is considered equally owned by both parties. When any spouse worked, and received payments, including retirement, those payments and benefits are therefore community property.

A person’s retirement benefits are a type of deferred compensation for work that was carried out during his or her employment. Retirement, whether it was received at the time of the divorce or not, is an asset that belongs to both parties. When a couple divorces, each party is entitled to half of each community property. When it comes to divorce and pension plans or retirement benefits, however, a person’s ability to continue to work will surpass the marriage and these accounts can be mixed between separate property assets and what belongs in community property.

Community Property in California

Community property rights begin only when the couple has legally married and last until the date of the couple’s separation. If the employed spouse was receiving retirement benefits before entering the marriage, the benefits are considered separate property.

On the other hand, if an employed worker is eligible to retire but has decided not to, the other spouse is entitled to receive half of the retirement benefits. Working spouses cannot deny benefits to the other spouse by refusing to enter into retirement. Additionally, the death of the working spouse also cannot avoid the other spouse from receiving benefits.

Dividing Community Property Assets

As previously mentioned, each party is entitled to receive half of each asset of community property. In accordance to this rule, the court aims to address each property (asset) and have it individually divided. When it comes to retirement plans and pensions, non-pro rata divisions of the property are allowed. This means that the benefits can be divided equally and as a whole without the need to divide each plan individually.

It should be noted that the working spouse might be able to retain his or her retirement as a whole if he or she is able to make some form of equalization payment to compensate the other party. This can also happen if the portion due to the other party is offset with another property. To illustrate, the non-working party could keep the family home in the event that the working spouse has elected to retain his or her retirement benefits. This can only happen if the allocation of assets remains relatively equal. When the working party wishes to retain his or her retirement or pension in its entirety, it can sometimes be difficult if the amount of benefits supersedes the total of community property assets. It is also important to note that when parties enter into an agreement (stipulation), they can elect to have the community property divided by any percent they wish. 

Hire an Experienced California Attorney for the Division of Retirement Accounts

Dividing a retirement account in a divorce can be a long and stressful process. For instance, if the retirement account was derived from a government office, spouses will need more information about how the account will be divided. Challenges can also come about when one spouse wishes to keep the entire amount of his or her retirement benefits.

The attorneys at Milligan, Beswick, Levine, & Knox, LLP , are committed to representing the rights and interests of those who are entering into a divorce. The firm has many years of experience in dividing retirement assets and understands the level of attentiveness each case demands.