Do I have to Split my Retirement in a Divorce?
In order to determine how retirement accounts
will be divided between spouses in a divorce, the Court must first determine
whether each retirement account is separate property or marital property. The
Court will award each spouse their separate retirement accounts and will
determine a fair or equitable approach to divide the marital retirement accounts.
How are Retirement Accounts Handled in a Divorce?
For many families, other than the equity in the family home, retirement
assets like pensions, 401(k) plans, Individual Retirement Accounts (IRAs),
profit-sharing plans, and deferred compensation plans are the largest assets.
Even if a retirement account or asset is earned solely by one spouse, the
portion which was acquired during the marriage is still marital property
subject to equitable division by the Court.
Can I Lose my Retirement in a Divorce?
Since Georgia is an equitable division state,
courts have broad discretion regarding how marital property may be divided
between divorcing spouses. A Court may decide to allow the spouse who earned
the pension or contributed to the retirement account to retain the entire
retirement account upon divorce.
However, if there are no other significant
marital assets to divide and a failure to separate the retirement account would
result in an unjust or inequitable division of property, the Court is likely to
divide the marital portion of any retirement asset between the parties.
The Court may divide the retirement account
between the spouses by percentages. In the alternative, a Court may award one
spouse a fixed cash amount.
Although pensions, 401(k) plans, IRAs,
profit-sharing plans, and deferred compensation plans are all subject to
equitable division, to the extent the account was earned or contributed to
during the marriage, the methods of dividing these various retirement assets
IRAs are the simplest accounts to divide upon
divorce. IRA's may be divided by rolling a portion of one IRA into the
recipient spouse's IRA. The division of IRAs upon divorce would, of course, be
subject to the various rules governing IRAs.
Unlike IRAs, 401(k) plans and pensions may not be
divided or rolled over into another account. To divide these types of accounts
or retirement assets, it is necessary to obtain a Qualified Domestic Relations
Order ("QDRO") from the judge once the divorce has been finalized. The QDRO is
an order which is separate and distinct from the Final Judgment and Decree of
Divorce. In most cases, these orders must be drafted by attorneys who specialize
in this area to ensure that these orders comply with the Retirement Equity Act
of 1984, a Federal law which allows a retirement plan, pension, or 401(k) to
distribute money to someone other than the plan participant.
QDROs can be applied to retirement plans
sponsored by most private employers. If a spouse has a military pension or
certain government pensions, different types of orders with different types of
forms may be required.
Dividing Marital Retirement Accounts
To determine how a retirement account may be divided upon divorce, the Court may take into consideration the following factors:
The Court will look at actual contributions, if any, which were made by the spouse who is not earning the retirement benefits.
Length of the Marriage
The Court will consider the number of years during the marriage in which contributions were made to the account(s).
Plans for the Future
The Court will also acknowledge the degree to which the couple has relied and set expectations for the future benefits.