People have to maintain gainful employment for years to be eligible for a pension. In many families, one spouse may prioritize their career more than the other. It is common for one spouse to have a pension, while the other may have limited retirement resources.
If spouses divorce, the pension benefits accrued during the marriage are potentially subject to division during the divorce process. Attempting to appropriately address a pension during divorce proceedings can be a challenge.
What are some of the solutions for fairly integrating a pension into a property division settlement?
1. Splitting the pension
It is frequently possible to divide a pension between spouses. The spouses can have one of their lawyers draft a qualified domestic relations order (QDRO). After securing approval and signatures on the QDRO, the spouses can submit it to the professional managing the pension. The spouse who does not currently have a pension could then receive a portion of the pension without risking any tax consequences or other secondary losses.
2. Offsetting the pension’s value
It is common practice for spouses to quantify the financial value of a pension and then factor that amount into other property division decisions. If one spouse wants to retain their entire pension, they could give up their interest in other marital property. They could also take responsibility for more of the marital debts. Determining how much of the pension is marital property can make it possible for spouses to balance out the value of the pension with other assets or financial obligations.
3. Offering alimony
Alimony, also known as spousal support or spousal maintenance, involves regular payments from one spouse to the other. It may be possible to arrange for the spouse who receives the pension to make structured payments for the duration of the pension to the other spouse. Agreeing to alimony can be fair in scenarios where dividing the pension or making other asset division concessions may not be appropriate solutions. Couples can work together to set terms that they view as fair and reasonable. They can also litigate and ask a judge to address a pension during divorce proceedings.
Pensions require careful consideration during divorce proceedings. Knowing what to expect during property division negotiations and litigation can help people set realistic goals and better ensure their financial stability after divorce and even during their golden years.