When a couple files for a Pasadena divorce, retirement benefits are part of the assets that must be divided. However, dividing retirement benefits can be tricky because different types of benefits are classified in different ways.
California is a community property state, but not all retirement benefits are considered community property.
Some retirement benefits that are considered community property and therefore subject to equitable division during a divorce include:
- 401(k) and 403K plans
- Military pensions
- Veteran's educational benefits
- Employee Stock Option Plans (ESOPS)
- ERISA funds
- IRAs
- Keoghs
The following retirement benefit types are not considered community property and belong only to the person who earned them:
- Compensation for military injuries
- Worker's compensation disability awards
- Railroad retirement benefits
- Social Security payments
Retirement benefits classified as community property can be divided through a present day valuation buy-out where the spouse without the benefits trades his or her share for an equal payment of cash or other assets. The benefits could also be divided into two separate accounts through the use of a Qualified Domestic Relations Order (QDRO). The retirement plan administrators can provide additional information on how this process works, including the possible tax implications.
Young people who plan on remaining in the workforce for several decades often focus more on the value of the marital home than on the value of retirement benefits when negotiating a divorce settlement. But in many cases, retirement benefits are the largest asset to be divided. Do not shortchange yourself by failing to think of your long-term financial needs.
Your attorney may recommend hiring a professional pension appraiser or actuary to evaluate the worth of the retirement plan before deciding which option is the best choice for your divorce settlement. The actuary or appraiser's services may cost between $100 and $300, but having accurate information regarding the true worth of the retirement plan could save you from making a very costly mistake.
How Can We Help?
Please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com if you are in need of legal representation during your divorce. Our experienced Pasadena divorce attorneys can ensure you receive the most favorable settlement possible.