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How does California divide retirement accounts in divorce?

On Behalf of | Jan 23, 2021 | Firm News |

If your marriage ends after 10 years or longer, you may have a healthy retirement account. Individuals ending a second or subsequent marriage will also have concerns about the division of retirement savings.

Review the basics of fairly dividing your retirement savings in a California divorce.

Factors in property division

California uses community property standards, which means you and your spouse have equal claim to marital property and debt. Marital property includes anything either of you earned or acquired during your marriage, including your investments and retirement savings. If you started your retirement account before the marriage, the court will decide on a fair share for your spouse if you cannot come to an independent agreement.

You may have a prenuptial agreement that designates each spouse’s retirement savings as separate property. The court will generally honor a valid agreement of this nature.

The Qualified Domestic Relations Order

When a retirement account is subject to division in a California divorce, the judge will issue a QDRO. This court order requires the administrator of the retirement plan to divide the funds according to your legal divorce agreement.

The state requires a QDRO for 401(k), 403(b) and similar plans as well as pension plans, employee stock plans and tax-sheltered annuities. You do not need this court order to divide government retirement plans, individual retirement accounts or deferred annuities.

Without proper documentation, the court or the retirement fund may deem a QDRO invalid, affecting the ability to settle your divorce. In this case, you could even lose your investments. For this reason, many individuals rely on an attorney to prepare or review a California QDRO.