Dividing retirement accounts in divorce
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Dividing retirement accounts in divorce

| Mar 29, 2021 | Divorce

People who divorce in their 40s and beyond often have significant retirement assets. California considers employer retirement plans, pensions and other investment accounts as part of the couple’s shared community property.

In this situation, review the factors that influence when a spouse can receive part of their partner’s retirement savings in a divorce.

Community vs. separate property

As a community property state, California requires couples to divide marital property evenly. This category includes all assets and debts earned or acquired by either person from the date of marriage to the date of separation. It does not include items established as separate property in a premarital agreement or an inheritance or gift received only by one person during the marriage.

The property division process

Those who divorce can decide to divide shared property however they see fit. They do not have to involve the court unless they cannot agree. In this case, the judge will make a decision based on the state’s community property standards.

Whether the couple submits their own agreement to the court for approval or requires a hearing for property division, the judge must issue a qualified domestic relations order. The QDRO requires the administrator of the retirement plan to divide the assets in the account according to the divorce decree.

Not every type of retirement plan requires a QDRO for division. The couple needs only the final divorce judgment to divide government pensions, deferred annuities and individual retirement accounts.

The court must issue this order to divide pension and defined benefit plans, annuities with tax shelter, stock received as an employee benefit, profit-sharing plans, and 401(k) and similar plans.