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How Are Pensions Split in a Divorce?

How Are Pensions Split in a Divorce?

| April 12, 2021
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If you were to get a divorce, you may be wondering how you or your spouse’s pension will be split.

The simple answer: it depends.

For one thing, you must examine the divorce laws and regulations for your state. In this case, Michigan is an “Equitable Distribution State.” This means that property must be distributed equitably in a divorce, but it also does not mean that everything will be a simple 50-50 split like it would be in a community property state.

With that being said, your assets and your spouse’s assets will be examined for what counts as “separate property” versus a “joint marital property.”

If you have assets such as a pension that you paid into before marriage, that portion of your pension would be yours because it would be considered as “separate property.” However, if you have a pension that you acquired while married, your spouse may be entitled to some of your retirement benefits.

To claim some of your pension benefits, your spouse will need a court ordered document called a Qualified Domestic Relations Order (QDRO). Note: Other plans may use a different term for the court order.

According to the U.S. Department of Labor, “A "qualified domestic relation order" (QDRO) is a domestic relations order that creates or recognizes the existence of an “alternate payee's” right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and that includes certain information and meets certain other requirements.”

Military and government pensions have other forms that are used in the case of a divorce, so this will also be a factor in how pensions are split in a divorce due to the differing documents and regulations for those funds.

With a QDRO, your spouse won’t be penalized for withdrawing from your retirement funds early because this document protects them from the tax penalty given when withdrawing your retirement funds early at the time of divorce. QDRO’s are subject to approval from your pension administrator on how the money will be distributed and when.

How much your spouse can receive from your pension will depend. You will also have to consider what the rules are for your plan itself.

Do you have a plan that provides benefits even after you pass away? Do you have a single-life payout or a joint-life payout plan? You will need to talk to your plan administrator to learn more about how your pension will be affected by divorce.

In some cases, you may not have to split any of your retirement funds. If your spouse has their own retirement plan, you may choose to just keep your individual plans and funds. In another case, you may be able to negotiate with your spouse to give them an asset of equal value that compares equally to your retirement funds. That way they get something, and you can keep your pension.

Again, how your pension will be split will depend. You will need to consult with an attorney, a financial advisor, and the administrator over your pension to truly understand what will apply to your situation. You will also have to factor in the divorce laws and regulations pertaining to Michigan in this case.

Please note: The information provided on this website and this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.  Information on this website may not constitute the most up-to-date legal or other information.  We are not attorneys. Please seek an attorney if you are in need of legal advice.

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