Retirement benefits can be among the most significant assets acquired during a marriage. They can also mean the difference between a comfortable retirement and financial distress. That is why it is critical to protect your rights to retirement benefits during your divorce.
Retirement benefits come from many different employer programs — including pension plans, 401(k) and 403(b) plans, deferred compensation, and more. Regardless of whose name is on the account, any amount of vested pension that has earned income between the time of your marriage and your divorce is considered a joint asset. Unvested interests are generally awarded based on what the court deems to be “fair and equitable.”
Dividing retirement benefits
Retirement benefits can be divided in different ways in Michigan. If both spouses have retirement plans of equal value, they usually get to keep their own plans. In offset division, the non-employee spouse gives the other spouse assets equal to the value of the benefits. Deferred division gives the non-employee spouse an interest in the plan through a domestic relations order. Payments are divided as they are made or the pension plan makes a separate payment to each spouse. Deferred division can usually be arranged with private retirement plans for the life of the employee or retiree and after death. However, some state, city, county or town retirement plans do not make direct payments to former spouses. Social Security benefits are handled differently.
A Qualified Domestic Relations Order (QDRO), drafted by an expert (generally an attorney or an actuary) and approved by a Michigan court, is required for the retirement plan to pay the benefits specified in your divorce agreement.
A special section in the IRS tax code allows divorcing couples to avoid paying penalties or taxes for dividing certain retirement plans.
To develop the fairest and most equitable division of your marital assets including retirement benefits, contact the Law Offices of Michael A. Robbins. Whether through negotiation or litigation, we have the expertise and experience necessary to resolve your legal problems successfully.