You've worked for years to build your pension. Now you're getting divorced, and your spouse wants a share of it.
Can your spouse really get part of your pension?
In New Jersey, the answer may be yes. Pensions and other retirement benefits earned during a marriage can be subject to equitable distribution in a divorce.
But that doesn't necessarily mean your spouse gets half of your entire pension.
The important question is usually when the pension benefits were earned.
If you were contributing to or earning pension benefits before you got married, that premarital portion may not be subject to equitable distribution.
The portion earned during the marriage, however, may be considered marital property.
This distinction becomes particularly important for someone who worked at the same company or participated in the same pension plan both before and during the marriage.
No.
New Jersey uses equitable distribution, which means marital property is divided equitably based on the circumstances of the marriage.
That does not create an automatic rule that every pension must be divided exactly 50/50.
The first step is determining what portion of the pension is actually marital. From there, the pension can be considered as part of the overall division of marital assets.
Dividing a pension isn't as simple as withdrawing money and handing part of it to your spouse.
Depending on the type of retirement plan, a Qualified Domestic Relations Order, commonly called a QDRO, may be needed.
A QDRO is a court order used with certain qualified retirement plans to recognize another person's right to receive some or all of the benefits awarded to that person in the divorce.
The exact process depends on the type of pension or retirement plan involved.
That's why the language used in your divorce settlement matters.
Retirement assets can be complicated.
Different plans have different rules, and pensions may involve issues such as valuation, survivor benefits, payment options, and tax consequences.
Before agreeing to divide a pension, you should understand exactly what is being divided, how it will be divided, and what the agreement means for your retirement.
A mistake today could affect income you were planning to rely on years from now.
Your pension may be one of the largest assets in your divorce. Don't assume your spouse gets half of everything. And don't assume that because the pension is in your name, your spouse has no claim to it.
First determine what portion may be marital property. Then understand how that asset fits into the rest of your financial settlement.
That's also why I created my free Divorce Smarter Course. It explains property division, retirement assets, alimony, custody, and other major New Jersey divorce issues so you can understand what you're dealing with before making important decisions.
Until next time,
Steve