Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest. Proverbs 6:6-8
First, Understand Community Property
A common misconception many have is this: “My retirement account is in my name only and I never comingled. So it is separate property.”
Wrong!
Community Property is ALL assets and debts acquired DURING marriage.
If you already had a retirement PRIOR To the marriage, the portion that you had prior to the marriage is separate. However, all contributions and gains on the contributions during marriage are community.
Keeping Separate Property Separate
Before you enter marriage, get a prenuptial agreement. I cannot emphasize the importance of this.
If you are already married, oh well. Read this article: Keeping Separate Property Separate Without Prenup .
If you have separate property prior to the marriage, it is VERY important that you keep it separate. Always keep proof, i.e., statements at date of marriage, stored in a safe place somwhere.
Defined Benefit Plans v Define Contribution Plans
Most plans fit into one of two categories: defined benefit or defined contribution.
Defined benefits plans have a value which is typically a monthly benefit based on contributions made by the employee spouse and the employer. In general, the non-member (non-employee) spouse has a 50% interest for the period of time the spouses were married and the member spouse (employee spouse) worked for the employer related to the defined benefit plan.
Defined contribution plan examples are 401(k) plans, 403(b) plans, and 457 plans. These types of plans have a value based on the funds currently in the plan. You can log on anytime and determine the current value of your plan.
Qualifed Domestic Relations Order
After you have agreed upon how the retirement assets will be divided, there are certain procedures to distribute. You may require a Qualified Domestic Relations Order (QDRO).
A QDRO is a special court order that allows retirement plan companies to divide certain benefits. They are required when dividing pension plans, profit-sharing plans, and 401ks.
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