Retirement is often mistakenly believed to belong to the person that earned it. What is misunderstood by many people getting divorced, is that your income belongs to the community estate. In other words, it is no longer “your” income but “our” income once you get married. That is because your time, toil and talent belong to the marriage (unless you have a prenuptial or post nuptial agreement that determines your property rights in a divorce). No matter where thein come for that time, toil and talent goes–retirement account or bank account, it does not change the fact that it is community property.
There are different kinds of retirement accounts. The most common types of retirement:
- Defined Contribution Plans. These include 401(k)Plans,Roth 401(k)Plans,403(b)Plans,457 Plans, Individual Retirement Accounts (IRAs), Roth Independent RetirementAccounts, Thrift Savings Accounts,andSimplified Employment Pension Plans (SEPIRAs),.
- Defined Benefit Plans. There are traditional pensions and cash-balance plans.
- Government Retirement Benefits. Sometimes these pensions replace social security entirely.
- Disability Benefits.
- Social Security Benefits.
Some forms of retirement are not property at all. Social Security Benefits are not property and, therefore, are not divisible in a divorce. However, if you have been married for at least 10 years and do not remarry, you may have your social security benefits calculated based on your former spouse’s social security earnings history or yours, whichever nets a higher payout.
Social Security Disability benefits, like social security benefits, are not property and not divisible. Veteran’s Disability benefits are paid instead of a pension for those that qualify as disabled. This means that while the pension might have been divisible, federal law exempts Veteran’s Disability payments from division and therefore, Veteran’s Disability benefits are not divisible in divorce.
Most other forms of retirement are considered property, and like all other types of property, can be characterized as separate property or community property. Sometimes, part of the retirement is separate property and part of it is community property. This occurs when a retirement account has deposits made both before marriage and during marriage. It also occurs when a separate property plan is rolled into a community property plan.
Once retirement benefits are characterized, the community property retirement benefits are divisible when the entire community estate is divided in a “just and right” manner. If the retirement benefit is regulated by Employee Retirement Income Security Act of 1974 (ERISA) then a Qualified Domestic Relations Order(QDRO)is necessary for the division of the benefit.