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Bay Area Family Attorneys > Blog > Property Division > Dividing Retirement Funds In A California Divorce

Dividing Retirement Funds In A California Divorce


You have likely already heard the phrase “California is a community property state.” However, too often people hear the phrase and, not knowing what it really means, let it go in one ear and out the other without really considering its ramifications on various items – such as retirement accounts.

Yes, that’s right – in California, retirement accounts are part of that “community property.” This means that when spouses divorce the respective retirement accounts are subjected to division between the spouses – just like any other community property.

This article aims to discuss the division of retirement accounts in a California divorce, the different kinds of retirement accounts that can be in play, and how the accounts are valued and divided. By better understanding the role that retirement accounts have to play in a divorce action, you can begin to build a plan of action as you move forward.

Retirement Account Types

The two main types of retirement accounts are made up of defined contribution plans and defined benefit plans.

Defined contribution plans are accounts that allow you to contribute to a retirement account, such as a 401(k) plan, and the employer will likely have some kind of matching program in place. The value of the defined contribution plan will be based upon the actual contributions made into the account and the investment losses or gains that were made by the account monies while active.

Defined benefit plans are pension plans. The defined benefit plan is available in some career fields and provides some amount of guaranteed income to retirees. The amount of pension will be determined by a formula given to the employee at the onset of work. It is typically calculated using factors such as the individual’s salary, years on the job, age at retirement, etc.

The value of these plans will vary widely depending on the specifics of the employee’s work history, contribution amounts, and the investment gains and losses of the contribution plan.

Dividing Retirement Accounts

In California, when a couple pursues a divorce part of that division of assets process includes valuating the various retirement accounts between the couple. Once the value of the accounts has been determined the accounts will generally be equally divided between the two divorcing individuals. The community property nature of retirement accounts in California means that unless there is a valid reason to come to another conclusion, you should expect for retirement accounts to be split evenly between the divorcing couple.

Qualified Domestic Relations Order

The actual division and reassignment of most retirement accounts is accomplished via a Qualified Domestic Relations Order (QDRO).

Utilizing a QDRO allows retirement plan assets to be divided in the case of a divorce without triggering tax penalties on the account monies. The QDRO specifies how much is to be awarded to the non-employee spouse and how the money will be distributed. Some plans, like IRAs, have other mechanisms/options in place that can allow tax-free funds transfers in the case of divorce. Tax requirements will differ/vary based on the specifics of each divorce. It is wise to speak with a knowledgeable assets division attorney on the specifics of your situation.

Contact Cardwell, Steigerwald Young

If you are seeking expert advice in your divorce action or property division matter, contact the experienced San Francisco property division lawyers at Cardwell, Steigerwald Young.




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