Your Right to Retirement Assets
One of the most critical yet challenging aspects of a divorce or legal separation is dividing retirement assets. These accounts often represent a significant portion of a couple's shared wealth and future financial security. Understanding your rights to these assets is essential to protecting your financial future.
The details of retirement assets can be difficult to understand, but Haskett Williams Monaghan Attorneys at Law is here to help you in Bend, OR, and the surrounding areas of Redmond, Sun River, Prineville, and Sister.
We can provide you with an in-depth and comprehensive overview of how retirement accounts are treated in family law and what steps you can take to allow for a fair division.
What Are Retirement Assets?
Retirement assets encompass a range of financial accounts and benefits designed to provide income during your post-working years. These accounts can vary significantly in structure and value, and they’re often one of the most contested areas in divorce proceedings. Common examples include:
401(k) Plans: Employer-sponsored accounts that allow employees to save and invest for retirement on a tax-deferred basis. Contributions are often matched partially or fully by the employer, significantly increasing their value over time.
Pensions: Defined benefit plans funded by employers, promising a fixed monthly benefit upon retirement based on factors like salary and years of service. These plans are increasingly rare but remain a valuable asset.
Individual Retirement Accounts (IRAs): Personal accounts, including Traditional and Roth IRAs, that offer tax advantages for retirement savings. Contributions to Traditional IRAs are tax-deductible, while Roth IRAs grow tax-free, making them an appealing option for long-term financial planning.
Thrift Savings Plans (TSPs): Retirement accounts that are specifically designed for federal employees and military members, offering low administrative costs and investment options similar to 401(k) plans.
Deferred Compensation Plans: Arrangements where employees defer receiving a portion of their salary until a later date, often retirement. These plans are commonly used by high-earning professionals as a tax-advantaged savings tool.
Oregon's Approach to Property Division
Oregon is an equitable distribution state. This means that marital property — assets and debts acquired during the marriage — is divided fairly but not necessarily equally. Courts aim to achieve a division that is just and reasonable based on the specific circumstances of each case.
Retirement accounts are treated as marital property to the extent that contributions and growth occurred during the marriage. Here are some of the key factors courts consider when determining how retirement assets are allocated:
The duration of the marriage: Longer marriages typically involve a more intertwined financial relationship, leading to a more equitable split of assets, including retirement accounts.
Contributions to the marriage: Courts recognize both financial and non-financial contributions. For instance, one spouse’s role as a homemaker may justify a claim to a portion of the working spouse’s retirement assets.
Economic circumstances post-divorce: Courts assess each party’s earning capacity, age, and ability to rebuild retirement savings after the divorce.
Separate property claims: Contributions to retirement accounts made before the marriage or after the separation are typically considered separate property. However, the growth of these contributions during the marriage may be divisible.
To get the assets you’re owed, you should know how to protect your rights. An experienced family law attorney can let you know about these rights and the steps you’ll need to take to protect your assets.
Steps to Protect Your Rights
Identify and Value All Retirement Accounts
Creating a comprehensive inventory of all retirement accounts is the first and most critical step. This includes accounts in both your name and your spouse’s name, as well as any joint accounts. Make sure you:
Collect recent statements for each account.
Determine the value of the accounts as of a specific date, often the date of separation.
Account for hidden or underreported retirement assets by consulting financial professionals if necessary.
In some cases, forensic accountants may be required to uncover assets that a spouse may have intentionally concealed.
Understand Qualified Domestic Relations Orders (QDROs)
A Qualified Domestic Relations Order (QDRO) is a legal tool used to divide certain types of retirement plans, such as 401(k)s and pensions. This order is issued by the court and directs the plan administrator to distribute a portion of the account to the non-employee spouse.
Without a QDRO, the plan may not honor the division of assets, and you could lose your entitlement. Key points to know about QDROs include:
Each retirement plan has its own requirements for processing a QDRO.
Drafting a QDRO can be difficult, and errors can result in delays or loss of benefits.
Consulting with an experienced attorney and financial advisor is critical for accuracy.
For IRAs, a QDRO isn’t required. Instead, the division is typically handled through the divorce decree. However, mishandling the transfer of IRA funds can lead to unnecessary taxes and penalties.
Negotiate Fair Terms
Negotiating the division of retirement assets can often be more efficient and cost-effective than going to court. A fair negotiation considers:
The tax implications of dividing each account.
The liquidity and accessibility of the funds.
The long-term growth potential and impact on retirement planning.
Whether one spouse will keep the retirement assets in exchange for other marital property, such as the family home.
Account for Tax Implications
Taxes play a significant role in determining the true value of retirement assets. Factors to consider include:
Early withdrawal penalties if funds are accessed before retirement age.
Differences in tax treatment between Traditional IRAs and Roth IRAs.
The impact of state and federal income taxes on distributions.
Whether assets can be rolled over into other retirement accounts without incurring taxes.
Facilitate Compliance and Follow-Through
After reaching an agreement, it’s essential to complete all required steps to finalize the division of retirement assets. This includes:
Filing QDROs with the court and submitting them to plan administrators.
Updating beneficiary designations on all retirement accounts.
Monitoring compliance to make sure the agreed-upon terms are executed.
Special Considerations
Pre-Marital Contributions
If you or your spouse contributed to a retirement account before the marriage, those contributions may be considered separate property. However, the growth of those contributions during the marriage is typically subject to division. Accurately tracing the source of contributions and their growth requires meticulous record-keeping and analysis.
Military and Federal Employees
Dividing retirement benefits for federal employees or military service members involves unique challenges. For example:
The Uniformed Services Former Spouses’ Protection Act (USFSPA) governs the division of military retirement pay.
Federal pensions, such as those under the Federal Employees Retirement System (FERS), may require special attention to survivor benefits and cost-of-living adjustments.
An attorney with experience in these areas can help you through these unique circumstances.
Post-Divorce Modifications
In some situations, the division of retirement assets can be revisited after a divorce is finalized. This is rare and typically requires evidence of fraud, mistake, or substantial changes in circumstances. Consulting an attorney can clarify whether post-divorce modifications are a viable option in your case.
Long-Term Implications of Retirement Asset Division
The division of retirement assets isn’t just about immediate financial concerns. It has long-term implications for your financial future. Failing to secure a fair share of retirement assets can:
Impact your ability to retire comfortably.
Limit your financial independence post-divorce.
Increase your reliance on government programs or family support.
To avoid these outcomes, it’s crucial to approach the division process with a clear understanding of your rights and long-term needs.
Why You Need an Experienced Family Law Attorney
Understanding the division of retirement assets is one of the most challenging aspects of a divorce. An experienced family law attorney will help you identify and value all marital and separate assets. They can also advocate for your financial interests in negotiations and court proceedings.
Protect Your Retirement Assets by Turning to Haskett Williams Monaghan Attorneys at Law
Your right to retirement assets is critical to facilitating financial stability post-divorce. By understanding the laws governing property division in Oregon and working with one of our qualified family law attorneys, you can take the necessary steps to protect your interests.
Contact Haskett Williams Monaghan Attorneys at Law today to get started with a consultation in Bend, OR.