Focused On Advocacy, Honesty And Commitment To Our Clients

What happens to your pension after divorce

On Behalf of | Jun 22, 2023 | Family Law

West Virginia residents face many difficult financial decisions during the divorce process. One of those decisions is how to handle retirement plans, like a 401K or pension. This joint asset can be particularly difficult to divide between spouses.

Joint asset

In a divorce, applicable family law principles determine the division of assets, including pensions. For example, assets earned before the marriage are typically considered separate assets. Assets acquired during the marriage are joint assets. If a prenup protects an asset like a pension then it isn’t divided during the divorce process.

Dividing a pension

The issue becomes more complex with a pension. The first thing to know is that for an ex-spouse to take part in a pension they will have to ask for it as part of a court order during the divorce. This court order is a Qualified Domestic Relations Order (QDRO).

Many of the assets split during a divorce are divided 50/50. However, this isn’t easy to do with a pension. This is because it’s difficult to assign a value to a pension until the payments start. It can also be difficult to determine the percentage the non-holding spouse should receive in instances where someone was earning the pension before the divorce and possibly after as well.

Deferred distribution is one popular method for dividing pensions. In this case, the spouse who is the non-pension holder will receive a percentage of the pension once it matures. This may be in monthly payments or as a lump sum. The amount of time the pension holder worked for the company during the marriage plays a major role in determining the percentage the non-pension-holding spouse receives.

Many divorcing couples find other ways to divide their assets. For example, the non-pension-holding spouse may have another retirement asset of a similar value. If they do, then the non-pension-holding spouse takes that asset. Another alternative is for the non-pension-holding spouse to take an asset like a piece of property as a similarly valued asset. This way, the couple avoids the complications of splitting a pension.