If you get divorced as someone with a 401(k) or retirement pension in California, you may be at risk of sharing the money you earned with your ex-spouse. California is a community property state, meaning the divorce courts divide all communal property in half – including retirement savings and pension plans.
It is possible, however, to avoid going in front of a judge to decide on the division of your savings accounts. This could allow you to better protect your retirement savings. You may need a family law attorney in San Diego to help for optimal protection.
How Much Can a Former Spouse Receive From a Retirement Plan?
In California, all retirement plans and related retirement benefits are considered community property. Community property is jointly owned by both partners in a marriage or domestic partnership. Under California’s community property divorce law, if a couple divorces, a judge will divide all property, assets and debts evenly – as close to a 50/50 split as possible. This means your ex-spouse could receive up to 50% of your 401(k) and pension plan.
Even if you are the person who worked for the pension plan or accumulated the money in a retirement savings account, in the eyes of the law, both you and your spouse own equal shares of the asset. You and your spouse create a community, where everything acquired by either employed spouse becomes community property. Any earnings, savings or work benefits you acquire during your marriage are thus subject to division.
In a divorce case, a judge has the power to divide all community property down the middle, including retirement savings and work pension benefits. If, however, you and your ex-spouse can work out a settlement, you may be able to avoid the division of your 401(k) and pension plan. A divorce settlement prevents the matter from going before a judge. Another way you may be able to protect your savings is with a separate bank account.
What If an Account Is Separate?
In California, a judge during a divorce case cannot divide or touch separate property. Separate property refers to property owned by only one spouse, not the community. In general, anything one spouse owned prior to the marriage remains separate property. Gifts or inheritance given specifically to one spouse during the marriage is also separate property. Any assets kept separate and not commingled after marriage also remain separate property.
You may be able to protect your retirement savings from division if you keep it in a separate bank account in your name only and do not commingle it with your spouse’s assets during the marriage. If you had retirement assets including a pension or retirement plan from a job you had before you were married, the defined contribution plan you made before marriage or domestic partnership will automatically remain separate property. Only the contributions made after your marriage (and before your date of separation) will be subject to property division in a divorce case.
Calculating your ex-spouse’s community property interest in your pension plan takes dividing your service credit from the date you were married to the date of separation by your total service credit, then multiplying this by your total pension benefit. Finally, multiply this number by 50% to determine your former spouse’s community property interest. You may need a lawyer to help you with this complex calculation.
How to Protect Your 401(k) and Pension Plan in a Divorce
In general, if a divorce case in San Diego involves a pension plan, it requires help from an attorney. A 401(k), pension or retirement savings account can make property division in a divorce case more complicated.
Hiring a divorce lawyer in San Diego may enable you to protect your retirement accounts as much as possible. A lawyer can help you understand separate vs. community property, protect your assets through innovative solutions such as a prenuptial or postnuptial agreement, and increase the chances of reaching a successful settlement with your ex-spouse. Discuss all the ways a family law attorney at our San Diego law offices can help you with property division during a free consultation at Boyd Law.