How Are Retirement Accounts and Pensions Handled During Divorce?

 Posted on September 16,2020 in Divorce

While the overall divorce rate in the United States has declined over the past few decades, it has actually increased for one demographic: people over the age of 50. In these cases, which are commonly known as “gray divorces,” there is a wide variety of complex issues that spouses will need to consider as they legally dissolve their marriage, including determining how to divide marital property. This can be a major concern for those who are close to retirement age or who have already retired since they will need to determine how to maintain financial stability so they can support themselves once their divorce is complete. However, no matter your age, retirement savings and benefits are an important issue to address during the property division process in Ohio.

Dividing Retirement Accounts and Pension Benefits

Marital assets include any money or property earned or acquired by either spouse after they were married and before they were legally separated, and these assets must be divided as equally as possible between spouses during an Ohio divorce. If a retirement account such as a 401(k) or IRA was created during a couple’s marriage, or if contributions were made to an account while the spouses were married, this account will typically be considered marital property. Likewise, if a spouse worked in a pension-eligible position while married, his or her pension benefits will be subject to division between the spouses.

Dividing the funds in a retirement account is often a fairly simple matter. In some cases, an account’s balance may be divided equally between the spouses, or one spouse may keep a larger portion of the funds, while the other spouse maintains ownership of other assets of an equal value.

Pension benefits can often be more complex since the actual monetary value of these benefits will not be fully understood until a person begins receiving payments following their retirement. Typically, a person will be entitled to receive a certain percentage of his or her former partner’s benefits, based on how long a spouse worked in a pension-eligible position while married. For example, if a person earned pension benefits over a total of 40 years, and he or she was married for 20 of those years, the marital portion of pension benefits would be 50 percent, and his or her ex-spouse would receive half of that portion, or 25 percent of the total benefits.

When dividing retirement accounts or pension benefits, a Qualified Domestic Relations Order (QDRO) should be used. This type of order will specify a dollar amount or percentage that a person’s spouse will be entitled to receive, and it can be submitted to the administrator of a retirement account or pension plan. A QDRO will allow funds to be transferred from a retirement account without penalties for withdrawal before reaching retirement age, and taxes will not need to be paid on this amount, as long as the funds are rolled over into another retirement account.

Contact a Wayne County Property Division Attorney

At The Law Office of Whitney K.S. Miller, LLC, we can help you understand the best ways to address the division of marital assets, and we will work to protect your rights and financial interests during your divorce. We will make sure you address retirement accounts and other types of the marital property correctly so that you will have the financial resources you need throughout the rest of your life. Call our qualified Wooster divorce lawyer today at 330-725-4114. We offer free consultations in most cases.

Sources:

https://codes.ohio.gov/orc/3105.171

https://www.investopedia.com/articles/retirement/03/060403.asp