Will you need to split your pension with a stay-at-home spouse?

When you start considering divorce, you’re usually most concerned about issues related to the division of your marital assets and the custody arrangements for your children, if you have any. One asset that many couples focus on while divorcing is the marital home. That makes sense, since the house is often the biggest investment of your adult life.

However, there is another major asset that couples end up worrying over in divorce. Pensions and retirement accounts, when properly funded, can represent as much capital, if not more than, your home. It’s only natural to worry about what will happen with your retirement fund in a California divorce. The truth is that there’s no simple answer to help predict the outcome of your divorce.

The courts have a say in dividing your assets

In divorces where spouses can’t agree on terms, the courts make all the major decisions. Even if you reached an agreement with your spouse about your assets or have a prenuptial agreement outlining the division of possessions, the courts will still review the agreement. This is done to ensure that neither spouse takes advantage of the other.

Here in California, courts follow community property principles when it comes to property division. Generally, anything acquired during marriage is community property, and the courts want to ensure that each spouse receives a proper portion of the community assets.

It matters when you funded the account, not whose name is on it

Community property rules are straightforward. Even if you earned far more money or were the only one working, your pay still typically belongs to both you and your spouse. When it comes to your retirement account, that’s important. The only deposits that typically would have a chance of being separate property would be deposits made prior to your marriage.

Any amount deposited during a marriage would likely be subject to division. Similarly, pension benefits accrued during marriage may also end up shared with your spouse. In some cases, the courts will issue a special order to divide the accounts. Other times, they will mandate the splitting of funds at dispersal, as sometimes happens with pension accounts.

In some situations, the courts may allow you to retain pension and retirement benefits, choosing to award your spouse other assets of a similar value to offset that decision. Regardless of how they choose to handle the situation, you may want to prepare yourself for reduced retirement savings. Advanced planning, both for how to handle asset division issues and how to handle any possible retirement savings reductions, can be important in divorces.