Retirement Funds And California Divorce

It is common to talk about the foibles of young love, or of young couples leaping into marriage before they really know who they are or what they ultimately want out of life. In these scenarios, it is not altogether surprising that very young couples make up a large percentage of couples who ultimately divorce. However, there has recently been a new trend rising: “silver/gray” divorce. This is a term referring to the significant rise in divorces occurring between couples later in life, around retirement age. While there is no end to speculation on the reasons for these later-in-life divorces, the end result for many couples is that the largest asset at stake at the end of the day is not a marital home, but the couple’s retirement assets.

So, as silver divorces rise, many couples close to retirement age may be questioning how their divorce will affect their retirement. Is their spouse entitled to a share in the retirement accumulated by the other? Are you both entitled to a share of one another’s plans?

While every situation and couple is different, there are some good general principles and tips that apply to many who are trying to better understand their retirement funds in the midst of a California divorce.

What are “Retirement Funds” under California Law?

Under California terminology, “Retirement funds” refer to a large number of cash savings programs and benefit plans. This can include:

• IRAs;
• 401(k) and or 403 plans;
• Military pensions;
• Veterans educational benefits;
• Defined benefit and defined contribution plans;
• ERISA funds; and
• Employee Stock Option Plans.

On the flip side, several programs or forms of compensation are not considered “retirement funds” such as social security benefits, workers’ compensation payments, and military injury compensation. These funds are, however, still subject to community property division under California law.

Retirement Funds and Community Property Law

As readers are likely aware, California operates under the legal principle of community property. This means that, with a few exceptions, much of the property that was accrued during the course of the marriage is considered “community property” and will be subject to even division between divorcing spouses.

California’s community property rules could equate to an even, or 50/50, split of retirement funds and assets. However, California also usually applies a time-rule formula to the division of retirement funds in a divorce. This formula works to label retirement funds as either community property, or as separate property belonging only to the spouse who earned that specific retirement asset.

The time-rule formula considers the time in a retirement plan during the marriage vs. the total time that the individual contributed to the retirement plan. This formula results in a percentage that is owed to the other spouse.

For example, let’s say that an individual was married for 10 years, and contributed to a retirement plan for 20 years. In the case of a divorce, the other spouse would qualify for 10/20, or 50%, of the funds that were accumulated in the plan.

Reach Out to Us for Help

When you are going through a divorce, it might feel like everything is changing. The San Francisco divorce lawyers at Cardwell, Steigerwald Young understand the special consideration that goes into ensuring that individuals close to retirement receive a fair portion of retirement funds at the end of their divorce. Contact our office today to see how our knowledgeable staff can start working for you.

Sources:

insurancenewsnet.com/innarticle/silver-divorce-and-life-insurance-settlements-navigating-a-new-landscape

drphil.com/shows/silver-splitters-facing-divorce-after-50/