Anyone who has gone through a divorce knows the emotional toll that follows. But that is not all, as it can also impact your financial life if you fail to protect your pension. Typically, a pension earned by one spouse is considered marital property that needs to be split in the event of divorce.
If that is the case, here are some of the ways you can protect your pension in divorce:
Know the laws in your state
The first step to protecting your pension during a divorce is to know the rules governing your state. Before your pension can be split your soon-to-be-ex would need to file a QDRO, requesting a share of whatever you have in your name.
If the order was approved by the Plan Administrator, the pension benefits earned during the marriage will be divided. That means your ex-spouse will be able to claim half of your pension.
Check the details of your pension plan
When you’re conversant with the rules in your state, your next step will be understanding how the plan works. First, you need to find out the method by which payments are distributed. Also, check whether the plan offers a survivor’s benefit.
If you’re operating a defined benefit pension plan, your spouse will have a choice of either receiving a lump-sum payment or a monthly annuity. If, on the other hand, your plan is a single-life payout and you choose the monthly annuity, payments will stop at your death. If it’s a joint-life payout, the payment continues for the life of the surviving spouse.
Propose an alternative
If you don’t want to lose half of your pension, consider offering your spouse another asset of equal value. It could be handing them ownership of a mortgage-free home or a life insurance policy.
If your spouse has a pension or some other retirement plan, you both can agree to walk away with what you already have, making the divorce process even faster.
Work with a professional
Whether you’re seeing some red flags that suggest that divorce is lurking around or already in the process, you will benefit a lot from working with a professional. There are individuals in the industry who specialize in asset division, known as certified divorce financial analysts (CDFAs).
Please note that these individuals don’t offer legal advice, and it’s in your best interest to hire an experienced divorce attorney to protect your interest and plans. That is exactly what we’ve been doing for the past few decades, and we can do the same for you. Feel free to call or fill out our contact form to book an appointment.
