Throughout a marriage, a couple may acquire several types of assets: property, cash, business assets, stocks and bonds, overseas accounts, and retirement investments. 401ks and other employer-funded retirement plans are as necessary during a divorce property division as any other asset. All the pensions and retirement assets are treated as community property in California, so fairly dividing them is paramount.
Fair Does Not Mean Equitable
One of the first things every divorcing couple needs to understand is that a fair property division doesn’t necessarily mean an equal one. There is no guarantee that assets will be split 50-50 in every case.
It might be possible for you and your spouse to negotiate the retention of retirement assets when their value is compared to other assets. For example, if your family house has a lot of equity, you may trade off an interest in the retirement funds in exchange for keeping the house.
In some cases, California courts consider a retirement account separate property. If you opened your retirement account before getting married, the value of that particular account before the marriage may be regarded as individual property. Any interest earned on that premarital amount during your marriage will also count as separate property.
You and your spouse can agree to designate certain assets or items as marital or separate property. But make sure you document this arrangement in a written contract signed by both of you. In other words, you can sign a premarital agreement.
How Are Retirement Accounts Split?
Legally dividing a retirement asset or pension account requires multiple steps. First, a court order must be issued to divide these assets. Once you have this order, your attorney must create a Qualified Domestic Relations Order (QDRO).
The court must approve your QDRO; only then can it be submitted to the company’s plan administrator. A plan administrator enrolls employees and their dependents in the insurance policies. Once the administrator approves your QDRO, the retirement account is split according to the specifics.
The Final Word
Lack of attention to detail in this matter can cost you significantly once your divorce is finalized, especially if you or your spouse is considered wealthy. If you’re concerned about how the court may handle your retirement assets during the divorce, contact Moshtael Family Law in Orange County, CA, for a free, no-obligation consultation. We will explain the property distribution process in your case and which assets you may be entitled to keep.
