Many couples come to numerous epiphanies when their marriage no longer works. Truth be told, equitable distribution comes with its share of confusion. The fact that retirement benefits will be split up in divorce can cause a great deal of angst.
In some marriages, a mother or father may decide to stay home with the children. The other parent takes on the family’s support, which provides for money and other types of benefits. This could include any number of retirement benefits, such as a 401K, pension, or stock options.
The end goal is to put away savings for the future and possibly create a monthly annuity to replace regular earnings. Often the party paying into the plan assumes they should solely reap the benefits.
New Jersey law says otherwise. Retirement benefits are considered marital assets and therefore subject to distribution. The fact that only one party paid into the plan has no bearing – however other factors may come into play.
Take for example, someone who was already ten years vested in a retirement plan when they get married. The couple stay wed for ten years after they tie the knot. Does that mean the divorcing spouse is entitled to half of the pension?
The short answer is no. As a family law attorney, I suggest that my clients retain an expert to evaluate the long-term benefits and payouts. In the example, the husband or wife who did not pay into the plan would not be entitled to moneys put away before the marriage began.
One other date also becomes critical in evaluating retirement plans. Calculations are based on the accrual of funds up until the date the divorce complaint is filed with the court.
In today’s day and age, is not uncommon for both spouses to work and put away retirement money. Both would be subject to equitable distribution as marital assets and divided accordingly.
After the splits are determined, a document known as a Qualified Domestic Relations Order (“QDRO”) is sent on to the administrator of the retirement funds. This provides a formula that ensures when the benefits are ultimately disbursed, the parties both receive their proper shares.
The goal is to have everything finalized at the time of the divorce and included in the property settlement agreement between the parties. However, things don’t always work out as planned.
A court opinion executed by the New Jersey Appellate Division just yesterday dealt with a pension issue. The defendant did not agree with the portion of money his ex-wife would receive from his military pension. He wanted a recalculation of the benefits, which the court said would start by using the military point system.
The judge in family court ultimately ordered the division of the retirement benefits. This was done after analysis by a professional pension appraiser. Since the defendant had not paid anything to the plaintiff prior to the recalculation, his ex-wife wanted him held in contempt of court. She also sought to have him pay her attorneys’ fees.
When a litigant is found in contempt of court, he or she could wind up in jail. The lower court judge did not find it appropriate in this case. The court also declined to charge the defendant for his ex-wife’s legal fees. There appeared to be a genuine issue concerning the recalculation of benefits.
In my experience, once my clients understand that retirement benefits are marital assets, they understand the value of expert advice. Rather than make uninformed decisions, I suggest people going through a divorce get a clear picture of their assets.
Divorce is not easy and comes with many issues. I offer a free one-hour consultation with prospective clients to discuss their situations. Please give me a call to set up a conference.