Without a doubt, going through a divorce can take a strenuous emotional toll on your personal life. It is important to also consider, that divorce can also have a long lasting financial impact on your life. Detaching your personal assets from those of your husband or wife can be problematic when your pension plan or retirement account is included in this division. Generally, a pension or retirement funds accumulated during a marriage earned by one partner is considered a community asset in California, meaning, it belongs to both parties. Get legal advice for further understanding if needed. This is important because if there is a divorce, the pension or retirement earned by one member might be subject to a division through the court.
Knowing the Basics of a Retirement Account Division
One of the most important factors you should consider is understanding that the rules and regulations regarding your pension can vary by your state. Another aspect to be aware of is that while pensions can be divided during a divorce, this pension division and allocation is not always instantaneous, depending on the type of account.
In regard to how much each party is entitled to in California, benefits earned in the duration of the marriage are commonly divided equally amongst the parties. To further clarify, while the pension benefits can be divided equally, pensions are not typically divided if they were earned outside the time of marriage.
Check the Specifics of the Pension Plan
Once you have become familiarized with the guidelines governing the allocation of pensions in California, you should also know that there are 2 additional key components: the first is the process by which payouts are distributed and the second is if the pension plan offers a survivor’s benefit.
Depending on the plan, you generally have the option of choosing between receiving a single payment or selecting a monthly annuity. If your specific plan allows for a single life payout and you have opted for an annuity preference, the payments would cease at the time of your death. In contrast, if your pension plan has a joint life payout, your husband or wife will continue to receive payouts from the plan even after your passing.
It is important to recognize how the pension or retirement plan works because it will affect how you will split the assets during the divorce proceedings as well as how you would receive funds afterward. For instance, if you have opted for a single life payout, your husband or wife may be subject to the payment option you have chosen, or they may be forced to receive monthly benefits, all depending on the structuring of the account. For planning, it is good to know these variables early to avoid surprises later.
Discussing Other Alternatives
In the event that you do not wish to divide your pension or retirement account with your former spouse, allowing him or her to receive other assets might be an option to look at. Giving him or her an asset of equal value can be an option if you are looking to offset the division of your pension. This is sometimes difficult as pension accounts do not always have a monetary value but use credits that translate to payments after retirement. Family Law attorneys can help you look at these options and determine if a tradeoff is in your best interest.
The Underlying Factor
Divorce is difficult enough, but it’s beneficial that you confront the financial issues which are involved. This is particularly true when your pension or retirement is part of the proceeding. Before you finalize a division, take the time to understand your rights as well as what options you may have for working toward a compromise.