Pensions in a Divorce

What happens in divorce to retirement funds you or your spouse accumulated? These include Social Security, IRAs, Keoghs, 401(k) plans, tax sheltered annuities, employee stock options (ESOPs), and self-employed person's individual retirement accounts (SEP IRAs).

There are some general guidelines to follow in determining which of these assets are subject to division in a divorce:

  • Social Security benefits are never considered marital property or community property and are not subject to division in divorce. Since these are federal requirements, the states cannot change this. If you have been married for 10 years or more, you have a right to Social Security benefits that accrued while you were married, even though you later became divorced. You are also entitled to Social Security survivor benefits if your marriage lasted at least 10 years. Caution: If you are approaching your 10th anniversary, have your divorce date come after your anniversary date or you will needlessly lose substantial Social Security benefits.
  • Stock option profit-sharing plans and defined pension plans are normally considered marital property and are subject to division no matter which spouse accrued the benefits. The challenge is in determining the present value of these assets. This can best be accomplished with the aid of the plan administrator or some other qualified expert.
  • Military and federal pensions and benefits, like Social Security, are federally sponsored and administered, and they are usually divided upon divorce. Military disability benefits are not considered marital property subject to division. There is a requirement that the parties be married for at least 10 years to share in any military retirement benefits that have accrued during the marriage.
  • Generally, all property owned by spouses�whether singly or jointly�can be divided by the divorce courts. This, however, does not extend to veteran's pensions and other veteran's benefits. While veteran's benefits cannot be given to the other spouse, a divorce court can take these benefits into account for purposes of making a fair and equitable division of other property or for establishing alimony.

Professional Licensure

Academic diplomas and professional licenses may be considered marital assets. This is particularly true when one spouse helped put the other through school to become a professional. Most valuable are the licenses to practice high-income professions�medicine, dentistry, and law. A Ph.D. degree is also an asset to which the courts are likely to attach a value.

A divorce court may determine that professional status is a marital asset worth $1 million or more. To balance outcomes, the court may leave the spouse with professional status very little in other marital assets.

Other Assets to Consider

If you have prepared a thorough list of assets before you negotiated your agreement, you will be less likely to overlook some of these less visible assets:

  • Inheritances due.
  • Options to acquire property.
  • Claims or lawsuits against third parties.