Dividing Retirement Assets
How is my 401(k) or IRA divided in a divorce?
Retirement assets such as a 401(k), 403(b), and an IRA are marital assets subject to equitable distribution Where both parties to a divorce have equal or nearly equal retirement savings in each of their own names, they may agree to keep each of their own accounts after the divorce. However, in cases where the retirement savings are lopsided or when all a couple’s retirement savings is titled in one party’s name, the funds will be equitably distributed like other marital assets.
Funds from a qualified plan (ie, 401(d) or 403(b)) cannot be distributed and given to a spouse without being subject to taxes and penalties unless it is divided pursuant to a special legal document called a Qualified Domestic Relations Order (QDRO). IRA’s, on the other hand, can be divided pursuant to a divorce judgment without a specialized order, with funds being transferred from one spouse’s IRA to the other spouse’s IRA.
How is a pension divided in a divorce?
A defined benefit plan is a company retirement plan, such as a pension, that pays a benefit that is based on an employee’s years of service to the company, school or government for whom the employee works and the employee’s salary history. Defined benefit plans start paying monthly benefits when an employee retires. Those payments will continue for the rest of the employee’s life and may include survivor benefits.
There are two ways divide a defined benefit plan. The first way to divide a defined benefit plan is to assign the defined benefit plan a “present value” and the non-titled spouse will get his or her percentage of that present value either in the form of case or through an offset of another marital asset to be divided.
The second way to divide a defined benefit plan is to give the spouse his or her share of the monthly benefit at the time the titled spouse receives his or her benefits or possibly earlier depending upon the plan documentation.
A skilled attorney will use financial software to ascertain the present value of the defined benefit plan and work with the client to determine how to best divide this important asset.
Contact me for assistance with your divorce matter.
For a consultation regarding your divorce, please call my office at (203) 557-0557 or complete the contact form on this site. My office is conveniently located at 246 Post Road East in Westport, Connecticut.
About Dori-Ellen S. Feltman
Dori-Ellen S. Feltman, attorney at law, serves clients throughout Fairfield County and New Haven County, Connecticut, including clients located in Greenwich, Darien, New Canaan, Norwalk, Wilton, Stamford, Norwalk, Westport, Weston, Easton, Danbury, Bethel, Brookfield, Milford, Trumbull, Monroe, Newtown, Shelton, Danbury, Ridgefield, Orange, Branford, Southbury, Woodbridge and New Haven.