Preparing for divorce is a process fraught with uncertainty. People never know what their spouses may say or do. It could be even more difficult to predict how a judge may handle financial matters.
Equitable distribution rules leave much to the discretion of a judge.
Spouses scrambling to set themselves up for life after divorce often attempt to protect certain resources as their separate property. Separate property is generally not divisible during divorce proceedings. Can spouses count on the courts to allow them to retain a pension in full as separate property when they divorce?
Pensions are often at least partially marital property
People often misunderstand the difference between separate property and marital property. The courts don’t particularly care whose name is on ownership paperwork. The most important consideration is when spouses have acquired assets or the income used to earn them.
One spouse may have begun accruing a pension before getting married. However, any amount contributed during the marriage is likely to be marital property. Even though it is a benefit directly associated with their employment, their spouse has the right to a shared interest in the pension during the divorce.
Dividing a pension is one option. Spouses can also use the value of the pension to balance the distribution of other assets and the division of marital debts. While directly sharing the pension isn’t always necessary, factoring its value into major decisions is typically part of the property division process.
Reviewing the marital estate with someone familiar with the law can help people as they prepare for divorce. Pensions and other high-value assets often require careful consideration in the early stages of divorce.