How will a Pension be Treated in Your Divorce?

PENSIONS WILL BE EQUITABLY DISTRIBUTED BY A NEW JERSEY COURT

New Jersey is an equitable distribution state, which means that all marital assets must be divided fairly between the spouses upon divorce. Pensions, 401Ks, and other retirement assets earned during marriage are considered properties that are subject to the equitable distribution laws and are typically divided by our courts equally between the parties for the period from the beginning of the marriage until the date that a Complaint for Divorce is filed.

Pensions are typically split in one of two ways:

• The two spouses can postpone distribution until the pension vests; or
• The spouse that earned the pension may elect to keep the pension and the other spouse gets to keep something else of equal value as a fair trade off.

PENSIONS MAY BE DIVIDED USING A QDRO PROCESS

The most common method of dividing pensions during divorce is through a Qualified Domestic Relations Order (QDRO). This is a distinct type of court order that is mandatory for purposes of distributing pensions and other retirement assets.

Using a QDRO, divorcing couples must calculate the portion of the pension earned between the date of marriage and the date of the divorce complaint. This is what’s commonly referred to in the legal community as the “divorce coverture portion.” The QDRO must be implemented in order to facilitate the transfer of the spouse’s share of the pension upon retirement to the other spouse.

The division of a pension asset will be treated differently if the spouse that earned the pension is retired and collecting his or her benefits, as opposed to a pension that is not yet in “pay status.” A pension that is not yet in pay status is fair game under the equitable distribution laws, and will be divided by a New Jersey Court between the divorcing spouses.

On the other hand, a pension that is currently in pay status can be treated as an asset subject to a different analysis whereby the Court will consider that pension benefits currently in pay status that were previously distributed according to the equitable distribution laws could not be considered income for purposes of considering or reconsidering a paying spouses alimony obligations as this would be considered as “double-dipping.”

If you need a consultation regarding how your pension will divided in your divorce, contact The Elfant Rickett Law Firm in Bergen County, New Jersey at 201.968.5700 or submit an online contact form