When a couple decides to divorce, they must divide their marital assets, which can be a lengthy process. Distributing marital property can be complicated when either party owns assets that are a combination of marital and separate property, such as retirement accounts. If you are contemplating ending your marriage, and your spouse or you own one or more retirement accounts, you should meet with an attorney to discuss how your assets may be divided. The dedicated Colusa and Lake County divorce lawyers at Carrion Law Offices will work diligently to help you seek a fair and just division of retirement accounts in divorce.
California differs from many states in that it is a community property state. In other words, most property obtained by either spouse during the marriage is deemed the property of both spouses and will be divided equally between the spouses in a divorce, unless it was set aside as separate property by a pre-nuptial or post-nuptial agreement. Any property owned by either spouse before the couple was married will remain the separate property of that spouse. In many cases, however, a retirement account will include both separate and community property. Thus, it may be necessary for spouses in Colusa, Lake, Sutter, and Yuba Counties to retain an experienced attorney to determine which portion of the account is subject to division.
How a retirement plan is divided will depend, in part, on the nature of the plan. For example, for defined contribution plans, such as 401(k), 403(b), and profit-sharing plans, the parties may be required to obtain a Qualified Domestic Relations Order (QDRO) to divide the account. These types of plans are governed by federal law, which expressly prohibits the plan from paying benefits to anyone other than the participant, who is the employee who earned the retirement benefits, unless a QDRO has been entered directing the plan to pay the non-employee spouse, who is known as the alternate payee. Payments under a QDRO may be either a lump sum payment or monthly installments for a defined time. People who receive a lump sum payment often elect to roll over the payment to another retirement plan or an IRA.
Other retirement plans, such as IRAs and SEPs, do not need a QDRO and can be divided via a court order. Notably, however, if the divorce decree does not state that any withdrawals or transfers made by the party whose name is on the account are tax-free under Section 408(d)(6) of the Internal Revenue Code, the spouse who withdraws money from the account will likely be required to pay penalties for early withdrawal as well as any tax penalties.
A retirement plan also can be divided via a buyout agreement. In other words, the employee spouse will pay the non-employee spouse the value of half of the community portion of the plan, while retaining the benefits in the account. If the parties agree to a buyout agreement, it is important that the terms of the agreement are clearly defined and that the agreement is incorporated into the marital settlement agreement.
The process of dividing assets that you have accrued during a marriage can be legally and emotionally complex. If you intend to seek a divorce, it is important to speak with a proficient attorney to discuss the division of retirement accounts in divorce and other complex issues. The skilled divorce lawyers at Carrion Law Offices will assess the facts of your case and advise you on your options and potential strategies. We assist people in divorce cases in Colusa and Lake Counties, as well as Sutter and Yuba Counties. We have an office in Colusa, where we can be reached at (530) 458-2950, and an office in Lakeport, where we can be reached at (707) 995-7006. You can contact us via our form online or at either office to set up a confidential and free meeting.