There are several different types of retirement benefits that a person can have, including but not limited to annuities, pensions and 401(k), 403(b) or IRA's. Pensions and annuities are slightly different but all of these types of retirement accounts are subject to division between the parties in a divorce case.
There are many people who wrongly believe that because one spouse accumulated the benefit through their employment or due to the nature of the asset that it is personal to them and cannot be divided by the court. The following is a very basic description of how the court may handle these assets in a family law matter. If you are interested in more information specific to your case, contact Michigan divorce attorneys for a consultation.
Can a Divorce Judge Divide a Pension Plan?
Yes, a family law judge has the power to order that the parties to the divorce are both entitled to the benefits accumulated by one party and this includes a pension. In the case of a pension, the court may order that one party retain the pension, that the parties equally divide the pension fifty/fifty or that they divide it along another percentage that the court deems just. If the participant in the pension plan accumulated some of the benefit through employment prior to the marriage, the court may order that the parties only divide the marital portion of the pension.
In order to effectuate the division of a pension, the courts require a qualified domestic relation order (QDRO) to be prepared and entered with the court. Once the judge has signed the QDRO and the clerk has entered it into the record, the parties must forward it to the plan administrator (typically a firm like Fidelity) for the pension. The plan administrator will then divide the plan so that there are now two participants and it will pay out fifty percent of the monthly benefit to each party when they become eligible.
Can a Divorce Judge Divide an IRA, 401(k), 403(B), IRA or Other Retirement Account?
Yes, a judge has the ability to divide these accounts in a divorce as well. In fact, it is even easier to divide these accounts. Typically, each party will be awarded fifty percent of the martial portion of these accounts. This can sometimes provide a problem of proof if one party is not able to establish the balance of the account at the time of the marriage, that is to say how much money they had in the account when they got married. If a party is able to do this, then typically only the increase in value from the date of the marriage to the date of the actual divorce will be divided.
Often both spouses will have such accounts and in those cases, the court typically will equalize out the balances. For instance, if one party has $50,000 in a 401(k) through his employer and the other party has a 403(b) through her employer with marital equity of $100,000, she would transfer $25,000 from her account to an account in his name leaving each party with $75,000 in retirement accounts. This is really not practical in the situation where both parties are entitled to a pension and in those increasingly rare cases each party is simply awarded 50% of the other's benefit.
In addition, unlike pensions, most of these types of retirement accounts do not require a QDRO for division but rather will perform the division when provided with a copy of the judgment and a letter of instruction on how to divide the account;. The plan administrator will often provide a form letter of instruction or other similar form with boxes to check off where applicable.
Reach Out to A Michigan Divorce Attorney for Help
If you are facing a divorce and have retirement savings or a pension plan, it is imperative to meet with an experienced family law attorney in order to discover how the divorce will impact your retirement savings. For more information about how your particular circumstances and retirement plans will be impacted by a divorce, contact our Michigan law office today. Our compassionate and caring staff can offer you the legal guidance you need.