Many California couples who get married do so with the intent of building a long-lasting future together. They set up investments and retirement accounts with the idea that they’ll get to equally benefit from them.
Sometimes life has other plans though. In a divorce, your top priority should be to protect your financial future – and sometimes that means protecting your retirement from being affected by divorce.
Is your retirement account a single asset or joint?
This depends entirely on the setup of your retirement accounts. In most cases, anything that went into the pension while the spouse was married is considered joint assets – meaning the other spouse has a right to it.
If each spouse has their own Individual Retirement Account (IRA) through their workplace, splitting retirement benefits might not be necessary. This doesn’t mean that your IRA won’t be split though.
How are retirement plans treated in a divorce?
There are various ways to split pension plans. For example, you can give the actual monthly benefit to your ex-spouse – when you’re entitled to it yourself – or just keep them on to receive survivor benefits.
Alternatively, you might take out a life insurance policy with your ex-spouse as the sole beneficiary. While complicated, this is a process that you must go through to ensure your ex-spouse gets what they’re entitled to and not anymore.
It’s much easier to split IRAs. Usually, you’ll fill out paperwork with your IRA and that exact amount will be transferred to your ex-spouse’s IRA fund if they have one.
Making this process easier
It’s important to do all of your paperwork ahead of time if you know your retirement accounts might come up in the divorce. Additionally, it might be worth talking directly to your spouse to figure out how to best split the retirement accounts.