Most couples think their most valuable community property asset is their house. Surprisingly, however, the most valuable asset for many couples is their retirement plan. Just as with other community assets, a divorcing couple must settle retirement division. In general, the law considers retirement benefits accrued during the marriage until the time of separation as community property. Here are the steps to divide retirement in divorce.

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Get help with the Steps to Divide Retirement in Divorce!


…or continue reading the article below to learn more about the steps to divide retirement in divorce.

How to Divide Retirement in Divorce

Retirement portfolios are often sensitive subjects.  You may have more rights than you realize. On the other hand, some couples simply agree to waive rights to each other’s retirement. Before you start the steps to divide retirement in your divorce, you must know 1) what is the value of the community property interest in the plan and 2) how to negotiate that value in the overall divorce settlement. Furthermore, in some situations, you also must take additional steps to divide the retirement in divorce. A People’s Choice can help you navigate this tricky process. There are three basic steps to divide retirement in divorce. Read on to learn more about this process.

Step 1: File a Joinder

One of the first steps to divide retirement in divorce is filing a Joinder. Use a joinder to formally attach (join) the retirement plan as part of the divorce. That is to say, a joinder adds the retirement plan as an interested party (the claimant) to the divorce case. Keep in mind, however, that filing a Joinder is not a requirement to divide every type of retirement plan. Some retirement plans do not require the parties to file a Joinder.

So why would you want to file a Joinder? First, some plans such as CalPERS or CalSTRS require a Joinder. In other words, they will not approve retirement division or a QDRO unless you formally join the plan. However, with this in mind, there are many reasons to file a Joinder, even if it is not required. As an illustration, if you want to make sure the plan is “locked up” until it can be divided, filing a Joinder would be critical. For example, a  Joinder would prevent the other party from depleting or borrowing against the account.

Requirements of a Joinder

To formally join a plan, Family Code Section 2060-2065 outlines the requirements to join a retirement plan in a divorce case. Documents required include:

  • Pleading on joinder.
  • Request for joinder
  • Order of joinder.
  • Summons (joinder).
  • Notice of appearance in form and content approved by the Judicial Council.

As mentioned above, one of the benefits of formally joining a retirement plan to the divorce it to freeze the account until you finalize the divorce. In other words, formally joining the retirement account into the divorce prevents either spouse from liquidating or borrowing against the plan.

Step 2: Negotiate Division of Retirement Accounts

One of the next steps to divide retirement in divorce is to negotiate what each party receives. During divorce negotiations, you must work with your spouse to divide the plan. In some cases, one spouse may elect to receive a percentage of the payments when the other makes withdrawals on the plan. In others, one spouse takes a lump sum and waives future claims. Sometime a party will waive their share of the retirement in exchange for receiving an equalizing value in another asset, such as a house. Lastly, if each spouse has a retirement plan of similar value, you may choose not to divide the plans at all.

Tax consequences may accompany your division decision. For this reason, you may want to speak with an attorney or financial planner specializing in the tax consequences of dividing retirement plans. Choosing the wrong solution for this division can cost both parties thousands in penalties and taxes.

Step 3: Prepare a QDRO

Agreeing on the terms of the plan division may be the hardest part, but it is not the end. One of the final steps to divide retirement in divorce is preparing a Qualified Domestic Relations Order (QDRO). Once you present the completed and court-approved QDRO, the Plan Administrator can divide the plan. Whether you decide to receive a percentage of retirement or a lump sum, you will need a QDRO. The following plans require a QDRO:

  • 401(k)
  • 403(k)
  • 457
  • thrift plan
  • profit-sharing plan
  • money purchase plan
  • employee stock purchase plan
  • other business plans

Usually, individual retirement accounts (IRAs) and pension plans will not require a QDRO. Check with the Plan Administrator about their specific requirements.

QDRO – Final Step to Divide Retirement

As mentioned above, preparing the QDRO is one of the final steps to divide retirement in divorce. Once the Judge signs the QDRO order, the Plan Administrator can divide the account. With this in mind, most plans have specific requirements for their QDRO before they will approve it. Generally speaking; however, a QDRO will contain the following information:

  • Name of the plan
  • Name and address of the alternate payee
  • Percentage or fixed-dollar amount the alternate payee will receive
  • Duration of the payments.

QDRO’s are Complicated

Don’t be fooled by what appears to be a simple process. QDROs are complicated. When A People’s Choice prepares a QDRO, we make sure to tailor the language in the document to the specific rules of the plan. You should file a QDRO as soon as your divorce is final. If you fail to file immediately, you could face negative consequences. Unfortunately, we have heard of many divorced individuals lose their portion of a retirement division because they did not timely complete the QDRO process. In this regard, many other things can also go wrong if you delay preparing a QDRO. First, alternate payees cannot receive back payments. Also, if the principal payee dies before your QDRO is filed, the plan will not pay out any benefits.

Do not jeopardize your future by leaving retirement plans out of your divorce. Contact A People’s Choice for more information about how to divide your retirement plan in divorce and how to protect your interests once your negotiations are complete. Call us today at 805-648-5540.

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