Is your pension a marital asset?
Whether you must split your pension depends on whether it is a marital asset. If you had the retirement account before you were married, then it is likely not a marital asset. If you started the pension during your marriage, then it will likely be considered a marital asset, and therefore, can be split in the divorce. However, if you had your pension before the marriage, but have earned on it since marrying, then the amount that you earned while married may be considered a marital asset, and the amount that you earned while you were married may be subject to being split between you and your ex. If this sounds a little confusing, that's because it is. But you don't have to worry – your attorney can help.
Does this mean I have to split my pension in half?
Not necessarily, but let's look into this more closely. You need not give up any of your pension at all if your ex agrees to taking something of equal value during asset division, such as a car or house, depending on how much your pension is worth.
It's also important to know the details of your pension before you agree to anything concerning dividing it up between your spouse. You may have the option to receive your pension-defined benefits in a lump-sum payment or monthly. Some plans have clauses that specify payments stop upon your death, and others continue payouts until your spouse's (or ex-spouse's) death. These are important details to know before agreeing to a settlement.
What is a QDRO?
If your spouse is seeking to obtain part of your pension in the divorce, be aware that they may file a QDRO, or a Qualified Domestic Relations Order. A QDRO “a legal document, typically found in a divorce agreement, that recognizes that a spouse, former spouse, child, or other dependent is entitled to receive a predefined portion of the account owner's retirement plan assets.”
While a QDRO seems like it is only beneficial to the ex-spouse receiving part of the pension, consider this: if your spouse files a QDRO, and the receives part of your pension through that, then the amount they get from your pension is taxable to them; however, if you agree to split your pension a certain amount without a QDRO, then you are still liable to paying the taxes on all of your pension, including the amount given to your ex.
So if it seems that there is going to be no way to keep the entirety of your pension, a QDRO may be a good way to minimize your losses.
Do I have to share my military pension?
Military pensions are similar to regular pensions, though there are a few things different. We cannot talk about military pensions and divorce without talking about the Uniformed Services Former Spouse Protection Act (USFSPA). The Act states “for orders dividing retired pay as property to be enforced under the USFSPA, a member and former spouse must have been married to each other for 10 years or more during which the member performed at least 10 years of military service creditable towards retirement eligibility (the 10/10 rule).”
Not only does the USFSPA require 10 years of marriage while in the military, but if the ex-spouse wants continued benefits from the military, the service member involved must have been a part of military service for 20 years, married 20 years, and that the years of marriage and service overlapped for at least 20 years. These benefits include receiving commissary, exchange, and health care benefits.
In the case that the years of service and marriage did not overlap enough, (let's say 20 years of service, but only 15 years of marriage), then your ex may only be eligible for one year of military benefits while they transition after the divorce.
As you can see, getting a divorce and splitting assets can be a real complicated nightmare for those involved. It's difficult to know exactly which paths to take that will benefit you most financially, and when you're dealing with retirement funds, it's best to get someone who is experienced in this area. As the former General Counsel for American Pensions, Inc., our founder, Tom Holland, has an extensive background in handling QDROs and divorces.
At Holland Law LLC, we'll make sure that you hold onto as much of your pension as possible. Our founder, Tom Holland, has the insight, experience, and knowledge to help you during this stressful time. To schedule an appointment with our firm in Fort Mill and Rock Hill, call 803-219-2630 or get in touch with us on our contact page. We also serve clients in York, Chester, and Lancaster Counties.