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Retirement account division in a California divorce

On Behalf of | Jun 21, 2024 | Property Division |

Property division is often one of the most complex parts of a divorce. Many couples are worried about losing financial security by splitting assets with a spouse, particularly valuable assets such as retirement accounts.

Typically, retirement plans are considered community property that must be divided in a divorce. California law considers any income or assets acquired during a marriage to be community property. This often includes money put into a retirement account.

However, the analysis is usually not that simple. It is common for spouses to hold retirement accounts that were opened prior to marriage. In this case, deposits to the account before the marriage might be considered separate property that does not need to be divided in a divorce.

Can we just keep our own?

Determining what portion of each retirement account is marital property and subject to division can become complex. To avoid this, sometimes the spouses choose to each keep their own retirement accounts.

Even if you and your spouse agree to keep your own accounts, a court has the power to order something differently if they believe the solution is not equal. California law requires that community property be divided equally between spouses.

If your retirement accounts are roughly equal in value, or your overall property division is equal, a court may approve the division. If not, one of you could be ordered to divide a portion of your retirement account with the other spouse.

How do we split the accounts?

Splitting retirement accounts requires a different process from the ones used to divide other pieces of community property. Retirement accounts are split via a qualified domestic relations order (QDRO). This is a document used specifically to transfer funds from a retirement account without facing tax penalties.

Each retirement plan has specific requirements for QDROs. It is important to follow these requirements to avoid complications or tax penalties.



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