Retirement benefits can be among the most valuable assets involved in a California divorce. They can also be easy to overlook because the money may not currently be available to either spouse.

Pensions, retirement accounts, and other employment benefits earned during marriage can contain a community property interest even when the account or plan is held only in one spouse’s name.

Retirement Benefits Can Be Divisible Property

California property division is not limited to houses, bank accounts, vehicles, and other assets that can immediately be sold or transferred.

Employment benefits can also be property.

The source materials identify employee benefit plans broadly, including public and private retirement plans, pensions, annuities, savings and profit-sharing plans, stock bonus plans, stock options, and other forms of deferred compensation.

Retirement benefits may be subject to division whether they are already being received, have matured but are not yet being received, or have not yet matured.

The fact that one spouse will not receive the benefits until years after the divorce does not necessarily mean the benefits should be ignored during property division.

How Can Retirement Benefits Be Divided?

The appropriate method depends on the particular benefit and circumstances.

One approach is to determine the value of the community interest and award the retirement benefit to the employee spouse. The other spouse can then potentially receive other community property, an equalizing payment, or both to accomplish the property division.

Another approach is an in-kind division. Under this method, the community portion of the benefit is determined and the nonemployee spouse receives an appropriate share of the payments.

When a pension is awarded entirely to one spouse rather than divided, determining the present value of the community interest may require actuarial analysis.

What Is a QDRO?

Certain retirement plans require a specialized order to implement the division.

A Qualified Domestic Relations Order, commonly called a QDRO, is used with qualifying retirement plans governed by federal law. Other types of retirement systems may require different specialized orders.

A QDRO is separate from simply stating in a divorce judgment that one spouse is entitled to part of the other’s retirement account. The order must address the retirement plan and provide the information necessary to implement the division.

Retirement plans can operate under different rules, which is one reason the source materials emphasize specialized assistance when preparing QDROs and similar benefit orders.

Retirement Benefits Should Be Addressed Carefully

Retirement division can also involve survivor and death benefits. The court may need to make appropriate orders to ensure that each spouse receives the community share to which that spouse is entitled.

Waiting too long to address these issues can create significant risks in some circumstances, particularly when survivor benefits are involved.

Identifying every retirement plan early, obtaining the plan information, and determining how each benefit will be divided can help prevent an important marital asset from being overlooked.