Lee Rosen, retired divorce attorney and founder of the Rosen Law Firm, talks about retirement funds and how you can use this site to help you divide your accounts.
I am Lee Rosen. This is our Divorce and Retirement Center.
Retirement is one of those divorce-related issues that sneaks up on people. I met with a guy a couple of weeks ago who came in and was explaining all of his assets and I asked him, “Well, what about retirement plans? Do you have any 401Ks or defined benefit plans, IRAs, that sort of thing?”
He looked at me and he said, “Yes, but why do you ask?”
Unfortunately, for him, anyway, he came to learn that his retirement plan is not something that belongs just to him. It is something that will be divided as part of the divorce process. That’s bad news for folks who don’t see it coming, who don’t expect it. It’s good news for some other spouses who are not the employee spouse and who weren’t counting on, or expecting that asset to be part of the division of property.
You see, retirement assets, for most families, are often the most valuable thing that they own. We usually think of our houses as being the most valuable thing, but, retirement plans, especially as you grow older, really become incredibly valuable. It’s not unusual at all for us to see a couple with hundreds of thousands, or in some instances, millions of dollars in retirement plan value that has to be divided in the divorce.
The retirement plans can be tricky assets to divide. They are not always straightforward and simple. Some of them are. 401Ks, for instance, are pretty straightforward plans. They are savings accounts for all intents and purposes. So are most IRAs, but there are other kinds of plans, there are plans called defined benefit plans, where we don’t have an asset with a particular value. We have an asset with a promise of a stream of future payments. They can be very tricky to divide. In those instances, we have to start off by figuring out what they are worth. Valuation of the plan may require an expert. We may have to bring in an accountant, or an actuary, or someone who specializes in the valuation of retirement plans. Then, we have to analyze the plan carefully and figure out how to classify it. It’s not unusual for a retirement plan to be part marital and part separate.
For instance, when an employee started working for the company prior to marriage, that portion of retirement accumulated before the marriage is going to be separate. Then, we have marital pieces, or components, that are accumulated during the marriage. The expert usually will help us figure out what amount of the value is marital and what amount of the value is separate. It can get tricky. It is a complicated math problem.
Finally, we’ve got to figure out how to distribute the plan. Sometimes that involves giving the entire plan to one spouse and offsetting that value with some other asset, maybe the house. Other times, it involves entering a qualified domestic relations order; a special court order called a QDRO, that will actually instruct the plan administrator to make payments directly from the plan to the non-employee spouse. It can be a tricky asset to deal with and a tricky asset when we are making financial decisions.
So, what we’ve done here on the retirement center, is pull together all the information we have about dividing retirement plans. You will find information about identifying plans, valuing them, classifying them, and distributing them. You’ll find detailed articles, answers to frequently asked questions, forms, example qualified domestic relations orders or QDROs, and other videos on this topic. All of the resources you need, you’ll find right here at the retirement center.