Government Pension Benefits After Divorce
During marriage, a couple generally expects their relationship to continue into their retirement years. As such, they may count on retirement assets in one party's name, such as a government pension, to help support them in old age. In divorce, equitable distribution (ED) or community property (CP) laws can protect the other spouse's marital interest in that pension even though her name appears nowhere on it. But ED and CP are not absolute rights.
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Marital Property Division in General
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Each state uses either ED or CP to divide property in a divorce. ED and CP states differ in many ways, but the key difference lies in the division of the marital estate. CP states seek to divide the estate equally. ED states, which constitute the vast majority, seek to divide it equitably or fairly. Fair and equal don't always mean the same thing, so ED laws contain a list of factors justifying an unequal division in certain cases. In both types of states, marital property generally consists of all property earned or acquired by either party after the date of marriage and before either the date of separation or another date specified by state law. This can include your or your spouse's government pension.
Division of Pension Benefits
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Valuing and dividing pensions in divorce can be tricky, because the real value of a pension depends upon how long you and your spouse live and at separation, the plan participant may not have retired. Courts will sometimes assign a present value to the marital portion of the pension, which is determined by actuarial experts in a complicated calculation that requires consideration of mortality and interest rates. Once they arrive at a present value of these future pension payments, they can use this to evaluate and divide the entire estate. Courts also can divide a pension by entering a qualified domestic relations order (QDRO) that values the marital portion of each payment and splits the parties' respective shares.
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Why a Court Might Decline to Divide a Government Pension
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State law directs what is marital property; some states exempt certain government pensions from the definition of marital property in divorce. Courts in states where all government pensions can be marital property may still distribute a pension intact to the participant in some cases. Such courts may assign the entire present value of the pension to you or your spouse and compensate the other with assets that can be accessed right now or give the pension to the participant to compensate for a larger distribution of marital debt. You or your spouse can therefore wind up with no benefits from the other's government pension -- but this doesn't necessarily mean you got nothing.
If You Didn't Assert ED or CP Rights Prior to Divorce
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ED and CP rights aren't automatic. Generally, you must assert them prior to the entry of a divorce decree or lose them forever, because ED and CP cease to operate at divorce unless there's a pending claim. You can protect your entitlement to your share of the other party's government pension by means of a marital settlement agreement without the necessity of filing an ED or CP claim in court; however, the plan will still require a QDRO to administer your share.
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