Divorce can have a long-lasting impact
on your finances once everything is said and done. Asset division is
an important part of a divorce, which includes all pension plans. You
earn a pension as part of your retirement benefits, and it is subject
to division upon divorce since it is considered a joint asset in most
cases.
When you plan your estate, how your
pension works after a divorce is an important component of the
process. Everyone privy to your estate needs to be aware of how your
pension will play out while you are alive and after your death. If
you want to protect your pension during a divorce, the following tips
may be helpful to you.
Check California Law
In California, the law provides that
you split a pension just like any other property. Pensions require
additional paperwork to divide.
You also need to think about community
property and separate property. California is a community property
state. This means any property you and your spouse obtained during
the marriage is divided equitably. Separate property is anything you
owned prior to marriage.
If you had your pension fund prior to
marriage, you may believe that you are in the clear and sill be able
to retain all of it. This is not the case. While the value of your
pension prior to marriage is your separate property, any
contributions you made to the pension during the marriage are subject
to division.
Additionally, some pensions are only
divisible by the Qualified Domestic Relations Order. This is a court
order that explains the details of the divorce. The order has to meet
specific requirements to be approved by the provider of the pension
and the judge. This type of order can be complex and have to list
specific information.
Review Your Pension's Details
Once you are clear on California's law
surrounding the division of a pension, you need to carefully review
the pension's details. You need to pay attention to the method of
distribution and if your plan provides survivor's benefits
specifically.
When you start a pension plan, you can
typically choose between receiving a lump-sum payment or a monthly
payment. You also should check if your plan has a single-life payout
or a joint-life payout. A single-life payout stops at your death if
you choose the monthly payment option. The joint-life payout allows
your spouse to receive payments after your death.
You need to be aware of these details
because it can impact how you divide the pension upon divorce.
Consider Alternate Pension Options
You and your spouse have the option to
come up with your own arrangements for pension division. If your
spouse has his or her own pension and it is approximately the same
value of yours, you may both want to agree to walk away with your own
pensions rather than going to the trouble to divide your pensions in
a divorce.
Dividing the Pension
In general, a pension is divided by a
cash-out or a reservation of jurisdiction. To cash out the pension,
an actuarial evaluation has to be obtained. An actuary deals with the
evaluation of pensions, annuities, and insurance policies.
He or she determines the present value
of the pension. The owner of the pension receives the entire pension
plan with the spouse receiving community property in equivalent
value.
Reservation of Jurisdiction refers to
the court order that upon retirement, the owner of the pension will
provide a portion of each pension payment. The portion is calculated
by dividing the years of the marriage by the number of years the
employee-owned the pension. This is the most common way pensions are
divided.
If you have any questions about
dividing a pension in a divorce, please contact us at the Law Office of Carla D. Allen. We are happy to assist you with
this complex process.
