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What happens to retirement benefits during divorce?

On Behalf of | Apr 22, 2019 | Divorce

Dividing your property may be one of the most difficult parts of your divorce. Deciding what you are going to keep and what your spouse is going to keep can be emotional, but it can also affect your long-term goals, like retirement.

Retirement benefits that you or your spouse earned may be divided during your divorce. However, there are many factors that can affect if the benefits will be divided and if so, how much of the benefits each spouse is entitled to.

Are retirement benefits marital property?

Retirement benefits could count as marital property if they were earned during the marriage. However, any benefits earned before the marriage, would likely remain separate property.

If one spouse’s retirement benefits are exempted from counting as marital property, then the other spouse’s retirement benefits must also be exempted. However, to make sure that this is of equal benefit to the divorcing spouses, the same amount must be exempted from each spouse’s retirement plan. This could mean that the spouse with the greater retirement benefit may not get the entire amount exempted.

How will marital property be divided?

In Kentucky, the marital property is divided based on equitable distribution laws. This means that marital property is divided based on what is fair, although this does not necessarily mean marital property will divided equally.

Some factors that a court may consider when dividing property, include:

  • How each spouse contributed to gaining marital property
  • The value of the property
  • The duration of the marriage
  • Economic circumstances of each spouse at the time the property is divided

Retirement benefits could be considered a factor of economic circumstances. If the court decides not to consider retirement benefits toward the economic circumstances, it must do so for both spouses.

If retirement benefits are considered marital property and a court determines that one spouse is entitled to a portion of the other spouse’s retirement benefits, the court may state this order in a Qualified Domestic Relations Order (QDRO). A QDRO allows funds in the retirement plan to be withdrawn and put into the other spouse’s retirement account. With a QDRO, the spouse who is losing retirement funds will not be penalized for the court-ordered withdrawal.

It can be difficult to predict exactly how retirement benefits will be divided by a court because there are many factors that can affect the outcome. However, retirement benefits can be substantial, so it is important to do everything in your power to ensure they are divided fairly.