Divorce & Pension Sharing
Every state has laws governing the division of marital assets and debts pursuant to a divorce case. Real estate, bank accounts, investment accounts and motor vehicles must all be classified and distributed according to the laws of the state in which the divorce takes place. For some couples, one asset that must be distributed is a party's pension plan.
Other People Are Reading
-
Community Property and Equitable Distribution
-
All states divide marital property and debt under either community property or equitable distribution laws. In community property states, courts must divide the estate equally; in equitable distribution states, the law applies a presumption that an equal division is equitable, or fair, but provides for an unequal distribution in the presence of various statutory factors. If a party's pension is comprised of entirely marital components, it may serve as a "distributional factor" justifying an unequal distribution in favor of one side even though the court can't divide the pension itself.
Marital and Separate Property
-
Both community property and equitable distribution states set forth definitions of marital and separate property in their domestic relations codes. Although variations among the states exist, marital property generally consists of all property acquired or earned by either spouse after the date of marriage and either before the date of separation or the date of divorce. Separate property consists of property acquired or earned outside of the marital property bookends. If a party was working for a given employer before the date of marriage or continued working after the date of separation or divorce, the pension can consist of both marital and separate components. The court will divide or distribute only the marital portion.
-
Dividing the Pension
-
As pensions generally cease at the death of the pensioner, the true value of the plan depends on theoretical factors such as the pensioner's life expectancy and the time value of money. Statutory or case law in a given state may designate a method or set of methods for arriving at the present value of a pension plan, which can then be used to determine the overall value of the estate. Expert assistance is usually required to accurately determine the present value of a pension plan. Due to the difficulties in establishing present value, some parties prefer to divide the plan via a domestic relations order (DRO) that splits up the marital portion of the pension and diverts the nonparticipant's share out of the participant's monthly benefit. Administration of the DRO may begin immediately. In cases where the participant has not yet retired, administration may not begin for many years.
Impact on Spousal Support and Child Support
-
The distribution of a pension can have a dramatic effect on a party's spousal support obligation or entitlement. Spousal support determinations rest, among other factors, on the ability of the supporting spouse to provide support and the need of the dependent spouse to receive it. A party who may have qualified as a supporting spouse prior to the division of the pension may no longer qualify afterwards. Similarly, a formerly dependent spouse may no longer be dependent once she begins receiving her share of the pension. Pension income is also included in child support calculations.
-
