Being married usually means that you have spent many years pooling financial resources with your spouse. For the years you have been married, and sometimes for many years before that, you and your spouse have been discussing your future and making plans for your retirement. There are a variety of ways that people will invest in the future, ranging from savings accounts to stocks to 401(k)s. In some situations, one or both spouses may have a pension through employment. Dividing a pension in divorce requires special attention.
Minnesota is an “equitable distribution” statute, which means that all marital property is subject to equitable distribution at the time of divorce. Marital property is, in general, all property received or earned by either spouse during the marriage, with a few exceptions. This is true even if the property is held only in the name of one spouse, which is often true of a pension. What makes dividing a pension more difficult than dividing, for example, a savings account, is that there are frequent penalties or tax implications for withdrawing funds against a pension if it is even possible at all. One alternative to immediately dividing a pension at the time of divorce is a Qualified Domestic Relations Order, which is referred to as a QDRO. A QDRO will order the pension fund administrators to divide the distributions of the fund. For example, if your spouse is entitled to a monthly payment of $500 at the time of retirement, the QDRO can direct the administrator to pay you the share the court decides is your equitable portion directly. Another option is for the spouse who has been earning the pension to give up another asset to balance the properties received by both spouses. For example, if it is determined that the pension is worth $30,000, the spouse entitled to the pension can agree that the other spouse will receive a different marital asset worth $30,000 in exchange for never having to divide the pension or the pension distributions. In order to make this a viable option, it will be necessary to know how much the pension is actually worth. Especially where the pension is not yet vested, this can be particularly difficult and may require the assistance of an expert.
We have extensive experience with helping our clients with property distribution in divorce. Call us today at (320) 299-4249 for a consultation.