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How people can address retirement savings in a California divorce
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How people can address retirement savings in a California divorce

On Behalf of | Jan 23, 2024 | Property Division

Divorcing couples in California either make their own choices about property division or have a judge rule on their economic decisions. The California approach to property division uses a community property standard. The income earned by both spouses and the property that they acquired during the marriage theoretically belong to both spouses.

Those preparing for divorce may have a marital agreement with one another explaining how to divide their resources. Without a pre-existing agreement, negotiation between the spouses or litigation and family court is often necessary. Higher-value assets and resources associated with future financial stability often trigger the most conflict during a divorce.

Retirement accounts can be worth hundreds of thousands of dollars and may be the most important asset for those getting close to retirement age. What happens to retirement savings during a California divorce?

Marital contributions are subject to division

People often feel confused about their rights related to retirement resources during California divorces. Specifically, they may question whether the account is subject to division at all. Often, retirement accounts connect to someone’s employment and may only be in the name of one spouse.

Even in that situation, a portion of the account could belong to both spouses. The timing of contributions to the account determines how much of its value is marital property that is subject to division and how much someone can protect as their separate property. Almost any contributions made during the marriage could be subject to division unless there is a pre-existing agreement between these spouses stating otherwise.

Spouses have the option of either splitting the account’s balance or considering the value of the marital portion of the savings when dividing other property. If spouses directly divide the retirement account, they can typically do so without any penalties or taxes. A lawyer can draft a qualified domestic relations order (QDRO). The spouses can then submit that document to divide the account without penalties.

For most couples, establishing the fair market value of the marital portion of their retirement savings is important to ensure a fair approach to retirement savings in a California divorce. Learning about what happens with valuable marital assets can help people better plan for divorce negotiations and more effectively rebuild their lives after a divorce.