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Dividing retirement accounts in a divorce

On Behalf of | Feb 8, 2021 | Property Division

Arizona is a community property state. This means that during a divorce, retirement accounts and any other property acquired during a marriage are divided equally among the spouses. It doesn’t matter who was making contributions to a retirement account; it’s considered as belonging to the community formed by the married couple. However, there are some nuances in dividing these assets.

Options for division

Retirement accounts can be divided with an instrument called a qualified domestic relations order, abbreviated as QDRO. The QDRO process is the same in every state because it applies to ERISA plans. ERISA is the abbreviation for an act of Congress dating to the 1970s that established federal, not state-level, jurisdiction for retirement plans in the U.S.

Pension plans in Arizona are almost always seen as being jointly owned by the couple. In general, the pension will pay out to both the named recipient and to the ex-spouse. The pension is paid for the life of the worker. Sometimes, payments of at least half can continue to a survivor after the death of the employee.

In some cases, one spouse will offer to accept all of a different asset in exchange for not taking payments from a retirement account. For example, one spouse may decide that getting the house is an equivalent option to receiving part of a pension or 401(k). The court may be willing to sign off on this kind of exchange.

Property division can be complex

Overall, property division is a complex process, and nuance is often required to accomplish it properly. Speaking with an experienced family law attorney is always advisable before deciding to divorce. An attorney may give potential clients an idea of what the process will entail.