What will happen to my retirement accounts in my divorce?

In most divorces, people’s pensions and retirement accounts are their highest-value assets, which can cause great anxiety and emotional distress during this stressful and challenging time. Uncertainty is one of the most problematic aspects of the divorce process.

Community property

California is a community property state, which means that all assets and debt acquired by one or both spouses during the marriage belong to both spouses and not just the individual who acquired the asset. Pensions and retirement accounts are treated almost the same way as other types of assets.

Separate property

Generally, separate property, which is property that isnot subject to distributionin a California divorce, includes:

• Anything one spouse earned, owned or owed before the marriage or after the date of separation.
• Anything purchased or earned with separate property
• Gifts or inheritances given to one of the parties exclusively

Who gets what?

Even though pensions and retirement accounts typically fall under the category of “community property,” and subject to division between the spouses, the court must first determine if the assets are community or separate property prior to the division of the assets.

To determine what each spouse is entitled to, it is necessary to know the following:

• What is the present value of all assets?
• When did the couple begin accruing the assets? Before the marriage? After the date of marriage?
• Are all assets in the retirement account subject to community property division?

Division of retirement accounts

In simplest terms and cases, if the funds in the retirement accounts are marital or community property, the funds are subject to equal division between spouses.

Keep in mind that at the time of division of assets, one spouse might be willing to give up part or all their share in exchange for some other asset (for example, the family home and vehicle,) so there is room for negotiation and discussion.

Divorce is the right decision for some couples. However, the divorce process comes with difficulties and challenges, including financial matters that the parties must consider and work with each other to find solutions for both.