One of the most consequential steps in a Florida divorce is the division of marital property. For many spouses filing for divorce, that property includes pensions. These retirement plans are not always easy to divide. And while a pension may be subject to division, a portion of it may be considered separate property. Making sure your rights and interests are protected, regardless of which party you are in the divorce, is why you retain the services of a knowledgeable family law attorney.
Orlando Family Team works with spouses who have pensions and those who want to claim a portion of the other party’s pension. No matter which side of the divorce you are on, we can help.
The Basics Of Florida Marital Property Division
All marital property, including pensions and other retirement plans, is subject to division through a process known as equitable distribution. “Equitable” does not mean equal, it means fair. That means when a court assesses the property that belongs to the marriage (the marital estate), it will consider how to divide it in a manner that is most fair to both spouses.
To determine this, Florida courts look at several statutory factors. Those include, but are not limited to, the following:
- The relative economic circumstances of both spouses
- The contribution to the marriage by each spouse, including as a homemaker
- The contribution of one spouse to the career or educational opportunities of the other
- How long the spouses were married
- The debts and liabilities of both spouses
This analysis is only used to divide marital property, which is everything acquired during the marriage. Separate property, on the other hand, is anything owned before the marriage.
How Are Pensions Treated In a Divorce?
Concerning pensions and other retirement accounts, anything acquired after the marriage will be considered marital, whereas anything that was acquired before the marriage will be considered separate. Of course, it’s rarely that black and white. Many spouses acquire pensions before their marriage and then see them grow during the years they are married. Whatever value the pension had before the marriage is still the separate property of the spouse who owns it. However, any value added to the pension after the date of marriage will be marital and therefore subject to equitable distribution.
Challenges With Dividing Pensions
Pensions are sometimes referred to as defined benefit retirement plans. That’s because they provide income according to a formula once the pension holder retires. These are different than what are called defined contribution plans, which include things like 401(k)s and IRAs. Such plans have a number value of assets in them that can be cashed out. Conversely, pensions usually have no cash-out value and must be distributed monthly.
This, along with the fact that the value of a pension is constantly changing, makes it difficult to assign a dollar figure when it comes time to distribute property in a divorce. Defined benefit plans are based on a formula that takes several factors into account, such as how long the plan holder worked. When it comes time to determine an approximate dollar value of the pension, an actuary usually must be hired.
Options For Dividing Pensions in a Divorce
Due to the complex nature of valuing pensions, many spouses find it preferable to keep their pensions in their entirety in exchange for other assets. You may not wish to split your pension, but might be willing to trade the marital residence, other real estate, or personal property such as a vehicle or boat. Of course, it’s still important to have an actuary or other expert assess a fair dollar value of the pension, to ensure you are not giving too much away to your spouse.
Sometimes, both spouses have pensions that have approximately the same value. Where the plans are worth the same or roughly the same, it is much simpler for each spouse to keep their pension and go about dividing the rest of the marital estate. Actuarial values are never certain, so in a situation where the pensions are nearly the same dollar value, it may make sense (and save time and money) to call it even and move on.
If the above two options aren’t suitable, then a Qualified Domestic Relations Order (QDRO) will be necessary. The QDRO is a court order that recognizes a spouse’s right to receive all or part of the retirement benefits (including from pensions) payable under the plan holder’s account. A properly drafted QDRO is submitted to the plan administrator with instructions for how to divide payment under the pension.
It should be noted that government pensions can be much more complicated than private ones because they are not required to accept QDROs. Depending on whether you have a federal, state, county, or municipality pension, a QDRO may not be an option. Here again, it may be preferable to assign a dollar value to the pension and trade assets with the other spouse, rather than spend time and money on drafting and executing a QDRO.
To assist spouses with valuing and dividing pensions, mediation is available. During mediation, the mediator will consider the value of the pension while exploring options for how to handle it. This can help the spouses reach a mutually agreeable solution so they can best settle their marital estate.
We’re Ready To Answer Your Questions About Divorce and Pensions
Pensions are one of the more complicated marital assets, and they can be more challenging still when factoring in separate (pre-marital) portions and different types of plans. Fortunately, divorcing spouses have options for how to divide this important asset. Whether you are the pension holder or the spouse entitled to a share of a pension, let Orlando Family Team help. Give us a call today to schedule your confidential initial consultation.