You and your spouse are talking about getting a divorce in California. You’ve been married for decades, but you’ve now become empty nesters since the children are at college. You’ve both decided that it’s time for a new chapter in your lives.
However, since you’ve been married for so long, the two of you have been saving for retirement together. You know that California is a community property state. What is that going to mean for these retirement accounts and how will they be addressed as you get divorced?
They are marital assets
First and foremost, retirement accounts are always counted as marital assets, not separate assets, in California. Once again, California is a community property state. The money that is put into these accounts comes from marital funds. As a result, any saving that is done still counts as community property, even if only one person was involved in shifting money into that account. For instance, just because your spouse was the one to authorize the deposits does not mean you have no right to that money.
How are these assets divided?
There are different ways to divide these assets, depending on how you saved. If you simply have an investment account, you may be able to divide that account and split the money between the two of you. Some stock portfolios allow you to split the portfolio so that you can both keep investing, but you get to control half of the stock yourself.
If the money is in a pension or some other employer-sponsored plan, then you can use a Qualified Domestic Relations Order. These types of plans are a bit more tricky because your spouse may not actually be collecting that pension at this time. A QDRO sets things up so that, whenever they’re supposed to begin collecting, they have to send you a portion of those payments.
Protecting your future
It’s very important to understand what happens to retirement accounts in a divorce because it can have a massive impact on your future. You don’t want a divorce to mean that you can’t retire. Always be sure you understand your legal options.