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Once you have made the difficult decision to get a divorce, you may think that the hard part is over. But when it comes time to divide up your marital assets, things can get sticky. Think of all the things that you have accumulated over the years—your house, cars, jewelry, artwork, vacation property, bank accounts, etc. When you get divorced in Florida, all assets accumulated during the marriage must be split equitably between the spouses. But many people are surprised to discover that this includes pension accounts. If you’ve earned part of your pension while you were married, that part is subject to distribution in a divorce.
But how, exactly, is a pension divided? How much will you have left? The answer to those questions depends on a number of factors.
Equitable Distribution
Florida is an equitable distribution state. That essentially means that the parties or the judge must divide all marital assets equitably between the parties in a divorce. Notice that we did not say “equally.” Equitable distribution does not necessarily mean an even 50/50 split. Instead, an equitable split is one that fairly and evenly distributes the assets between the parties. This can be done in any number of creative or not-so-creative ways. For instance, one couple might decide to split the value of their assets down the middle. But another might decide that the wife should take the summer home in exchange for the husband keeping the investment accounts. As long as the distribution is fair, a judge is likely to sign off on it. Now, let’s take a look at common factors that courts consider when deciding how much of your pension you can keep and how much might go to your ex upon divorce.
Factors for Dividing Pensions in a Florida Divorce
A judge considers many factors before making equitable distribution decisions during a divorce. As far as your pension is concerned, one of the first factors assessed is how much of the pension account qualifies as marital property. If you recall, only marital property—i.e., property accumulated during the marriage—is subject to division in divorce. So one of the first questions to ask is, How much of the pension account was acquired during the marriage? Maybe the answer is 100%, maybe it’s more like 20%. If you earned part of your pension before you got married, that part is not considered marital property. Therefore, that portion would not be distributed during the divorce; it’s yours to keep. But the rest of the account that is marital property must be distributed. Here are some additional factors judges look at when deciding how to divide a pension:
The length of the marriage;
Each spouse’s contribution to the marriage, financially and otherwise;
Each spouse’s contribution to the improvement of marital assets;
The overall economic circumstances of each spouse;
Each spouse’s debts and liabilities; and
In what type of account is the pension held?
This last question has significant consequences for the division of assets. So let’s look at the most common types of retirement accounts and their impact on equitable distribution.
Traditional Retirement Accounts
Traditional retirement accounts generally fall into two categories: Defined-benefits plans and defined-contribution plans. This is important to know because the type of plan will impact the manner by which the court divides the pension between the parties upon divorce.
Defined-Benefits Plan
Typically referred to as a pension plan, defined-benefit plans generally provide an employee with a pre-determined amount of money when they retire. The employee can elect to take this amount in a lump sum payment or have their employer disburse it in periodic payments upon retirement. Employers usually foot the entire bill for defined-benefit plans, with little or no employee contributions.
So if you have this type of pension, the first thing you need to do is determine its present value. You also need to determine what part of it is marital property and subject to equitable distribution. Once you have these figures, you’ll know how much of your pension your ex is entitled to. They can then take their share in a lump sum payment, or elect to take periodic payments at the time of retirement.
Defined-Contribution Plan
A defined-contribution plan does not have a specific payout amount. Instead, it functions more like a tax-deferred retirement savings account. An employee—and sometimes the employer also—contributes to this plan throughout employment. Upon retirement, the employee can access this money to pay for living expenses. A 401K is a popular defined-contribution plan.
These plans are a bit more complex when calculating how to split the benefits in a divorce. In short, the account's current value is multiplied by its percentage of vesting and split between the parties. For example, suppose Sue and Sam are married, and Sue contributes to her pension that fully vests after working 10 years. She and Sam get divorced after five years when the account has reached a value of $100,000. To determine the account’s present distributable value, Sue would divide the current value by the percentage of vesting—in this case, 50% because she’s only worked through half of her 10-year vestment period. That puts the current divisible value at $50,000, of which Sam would get $25,000.
Other Considerations
You may need some additional information if you have a different type of retirement plan, such as a government or military pension. Also, keep in mind that spouses can voluntarily elect to divide pension assets any way they want, as long as the court would ultimately find the split to be equitable. For instance, in our example above, Sam could decide that he wants their boat—valued at $25,000—instead of his half of Sue’s pension.
Let Us Help
The attorneys at The Jarbath Peña Law Group understand the challenges you face after you decide that a divorce is the best way to move forward with your life. One of those challenges is trying to walk away with your assets intact. You have worked very hard for everything that you have, and we know that you don’t want to lose it all in a divorce. Your best chance of getting a good outcome is having an experienced and compassionate legal advocate by your side. We can put our knowledge to use to make sure that you don’t give up anything you don’t have to when splitting up your property. Let us protect your rights. Call today at 305-615-1005 or through our online contact form to set up your initial consultation. We look forward to meeting you!