How much of my retirement is my spouse entitled to? Hi, I’m Lee Rosen.
That can be a tricky question to answer, not because retirement plan law is so incredibly tricky. It’s because the scenarios that people go through can be complicated. We’ll see scenarios where someone is married after they’ve accumulated a substantial amount in retirement, and we’ll see other scenarios where after the marriage they start accumulating retirement, and every sort of variation in between.
So we’ve got to carefully analyze when the money came to the parties, how it came to the parties, and what’s happened to it over time. It really is a math problem, and it often requires the expertise of someone who’s good at math. We end up using accountants, actuaries, and other experts who are in the business of valuing retirement benefits.
In analyzing a retirement plan, we first try to figure out which portion of it is separate property. That involves property that was accumulated prior to the date of marriage. For instance, if someone had been working for a company for 10 years and then got married, all of the value accumulated during that first 10 years would be separate property. Now what happens if that first 10 years’ worth of value has changed during the marriage? Well, as long as those changes are what is called “passive”, then they, too, are treated as separate property that belongs to the spouse that earned it. A passive appreciation or depreciation would be from assets just sitting in an account and either going up or down in value. Typically, they’ve gone up, and that increase in value is passive. It’s therefore separate and belongs to the spouse that brought that asset into the marriage. That’s the first thing that we look at.
Then we look at marital property in the retirement plan. That’s value that was put into the plan during the marriage. So if the employee was married and putting money into a 401k, that would be marital property that is ultimately going to be divided. Were also dividing marital property known as “active” appreciation. So even if you had some separate property in your retirement plan, something that had been earned prior to the marriage, if during the marriage you were investing it or trading it, that growth might very well be active appreciation that ends up becoming marital property and gets divided. You see why I say this is tricky, and that’s just the tip of the iceberg of tricky scenarios.
We often have retirement plans that are what are called “defined benefit plans” where instead of it being like a savings account, where money is being accumulated in the plan, there’s actually a promise from the employer to pay a certain amount. And when some of that is earned prior to marriage, and some of it is earned during marriage, we have to apply something called the “marital coverture fraction.” And again, big time math problem.
So this is not always straight forward, it’s not always simple. It always involves a lot of math, and we’re going to have to work though your situation step-by-step to figure out just what the numbers are going to be. So it’s a big math problem. It requires careful analysis. It’s complicated, and tricky, but ultimately it can be done. We do it in most every case. We work through the numbers. We come up with a specific answer to the question “How much of my retirement plan is my spouse going to get?” Once we’ve done the math, you’ll know the number, you’ll know what you’re going to pay or what you’re going to get, and how it’s going to be dealt with over time.