A pension is an investment fund to which a person, or their employer has contributed during their working life and is received as payments during that person’s retirement. During the years of employment, monetary contributions are made to a retirement plan, and once retired it because a “pension”; basically a tax deferred savings plan. In a California divorce, the rules relating to the division of pensions are complicated. Generally speaking, a pension earned during marriage is considered to be a joint asset of both husband and wife.
If a pension is divided between divorcing spouses, it must generally be done at the time of divorce when other marital assets are divided. However, if you were to withdrawal money earl from a pension or retirement account, there can be extreme tax repercussions. However, there are federal provisions that help spouses to divide these retirement plans and avoid tax penalties.
The legal tool most commonly used is called a Qualified Domestic Relations Order (QDRO). It allows a state court to split any qualifying benefit plan or pension plan between spouses. Most retirement plans will pay pension benefits directly to divorced spouses if the domestic relations order meets certain requirements.
In some situations spouses choose not to use a QDRO and instead evaluate a pension plan or 401(k) plan to determine it’s value based on it’s holdings on a given date. For some types of plans, however, experts are necessary as complex calculations involving life expectancy and the rate of return of the plan’s assets are used to arrive at the current evaluation.
Contact Thorsteinson Law Group in Long Beach or Huntington Beach to help you with your divorce. We provide complimentary consultations, and are dedicated to helping you through the divorce process. Brett Thorsteinson is a divorce lawyer who will advocate for your rights.