Divorce proceedings are complex enough, but even more so when you figure in high assets. Perhaps the highest asset in these cases is the pension plan. Its value and regulations make it the most complicated aspect of divorce.
Although your attorney will handle the division of your pension plan, it is still wise to understand how divorce will affect your retirement so you can prepare accordingly.
California law on community property
As with most other assets, any contributions you make to your pension plan during the marriage make that portion of the account joint property. Upon divorce, division of the money will be equal (50/50), not equitable as in some other states, unless you two can come to some other agreement. For example, you may agree that you get to keep the pension plan in exchange for your spouse receiving another valuable asset.
Necessary documents for splitting pension plans
The complexity of this one asset requires specific documents for dividing the benefits.
- Retirement Plan Joinder: This form makes the management organization of the plan a party in the divorce. Only specific plans require the completion of this step.
- Qualified Domestic Relations Order: A QDRO is the document outlining how the court has divided the pension plan and applies to private plans.
- Domestic Relations Order: DROs differ in that they are for state and federal public plans.
Opportunities for mistakes abound, as pension plans can be as unique as the couples that are splitting them. The division phase is likely to involve other professionals to ensure accuracy, fairness and validity so you do not face any issues once the divorce is final.
Importance of timeliness
You must have the QDRO/DRO done before the divorce is over for maximum protection. Otherwise, your spouse may still be able to access the funds or inherit the account if you pass away. For this reason, remember to update your estate plans during divorce as well.