Can an Ex-spouse Claim Your Pension after Divorce?
- Will my pension be split in our divorce settlement?
- How will the division of my pension be calculated?
- Can a marital settlement agreement be changed?
When a couple divorces, it's possible for one spouse to claim a portion or all of the retirement benefits, including pension benefits, earned during the marriage. This depends on where the couple lives, as state laws vary.
Generally speaking, if the couple was married long enough for one individual to be vested in their pension plan, the money derived from that plan is considered marital property and may be subject to division by a court during divorce proceedings. If this happens, a former spouse may receive a lump sum, or they may be entitled to monthly payments from the pension plan or an annuity contract resulting from those benefits.
It's important to note that there are laws in place that protect spouses from being cut off from their pensions when going through a divorce. That said, each case is unique and should be discussed with an attorney before furthering any actions.
Will my pension be split in our divorce settlement?
This is a common question, and the general answer is, “Maybe.” Any asset acquired while two people are married is subject to asset distribution in divorce. This means if your pension was funded, even partially, during your marriage, your spouse may be entitled to half of the portion that was funded while married.
If your former spouse is eligible to receive part of your pension, it may be possible for them to receive an equalization payment instead of direct access to your pension. In this scenario, a court would determine how much of your pension your spouse is entitled to. You would then make a payment to them for that amount, keeping your full pension intact.
Your ex-spouse may receive direct compensation from your pension through a qualified domestic relations order, or QDRO. A QDRO is a court order that allows one spouse's share of the other person's pension to be transferred into another account, such as an individual retirement account (IRA) or 401(k).
How will the division of my pension be calculated?
To understand the answer to this question, it helps to first understand the differences between two distinct property categories: marital property and separate property.
What is marital property?
Marital property is any type of asset or debt acquired during the course of a marriage, like a pension. Both spouses are considered co-owners regardless of whose name is on the deed or title. This means that each spouse has equal rights to the property upon divorce.
What is separate property?
Separate property is anything owned by one spouse prior to the marriage or acquired through inheritance or gift during the marriage. These assets remain the sole and separate property of that spouse after divorce, provided the assets were not commingled with marital property.
If you know divorce is imminent, take steps now to protect your financial health in your post-divorce life. Read about how to find and work with a certified divorce financial analyst, or CDFA, here.
Property division depends on your state
In terms of how your pension would be divided in divorce, it depends on whether your state follows the principle of equitable distribution or the principle of community property.
In a community property state like California, all assets acquired during the marriage are considered to be the property of both spouses. It doesn’t matter who actually earned them. Thus, upon divorce, all marital assets (including retirement plan assets like a pension) should be split 50/50 between spouses.
In an equitable distribution state, the government recognizes that some assets may have been acquired solely by one spouse’s efforts. Thus, the court may divide assets unequally if they deem it just and fair to do so. Furthermore, in equitable distribution states, pensions received prior to marriage are considered separate property and not subject to division upon divorce.
Note: Most states in the U.S. are equitable distribution states rather than community property states.
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Can a marital settlement agreement be changed?
Yes, a marital settlement agreement may be modified after it's been signed and approved by a judge. However, this isn't something your ex can just do on a whim.
To modify an existing marital settlement agreement, your ex would need to show a substantial change in circumstances. Let’s say you're paying alimony to your ex. If your ex recently lost their job, they could petition the court to modify the marital settlement agreement, temporarily or permanently increasing your alimony obligation.
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