It is understandable that people facing divorce may have considerable concern about what will happen to their retirement accounts. This is especially true for those approaching retirement or already there. The size of those accounts will have a direct impact on the standard of living for the rest of their lives.
Under Nebraska law, the court divides marital property (property accumulated during marriage by either or both parties) equitably between the parties. Equitable division is more about fairness than about a 50-50 allocation, it is often dependent on other circumstances.
Retirements accounts created during the marriage, and money added to them during marriage, are part of marital property. A retirement account that one spouse had before marriage is nonmarital, separate property owned by that spouse alone, except that money earned during marriage and deposited there, or employer-matched funds added to it during marriage, are likely marital. A court could find that such an account is part nonmarital and part marital, with that part subject to equitable division, depending on the circumstances.
Fairness and reasonableness
The Nebraska Supreme Court has said that the “ultimate test in determining the appropriateness of the division of property is fairness and reasonableness as determined by the facts of each case.” Those principles apply to the division of retirement accounts, as well.
From a practical standpoint, parties in divorce may be able to enter into a settlement agreement in which they decide how their marital assets, including retirement benefits, will be divided between them. Otherwise, the court will make those decisions. It will be up to the parties, usually through their legal counsel, to present evidence to the judge about their circumstances and how their individual needs, assets and earning potential impact what is equitable when it comes to dividing retirement assets.
We will discuss military, police and fire service pension allocation in a subsequent blog.