Divorce is a complex process. People considering divorce, and those that have made the difficult decision to pursue divorce, have many questions about what the process will entail and how certain aspects of the divorce will be handled. One question many people commonly have is regarding retirement accounts and benefits. Retirement accounts and benefits are one of the most complicated aspect of divorce in any state, and Alabama is no exception. People want to know whether or not their spouse might be eligible for a portion of their retirement plan or benefits, and the short answer is usually yes. However, there is a great deal to consider when determining whether or not retirement plans and benefits are divisible as part of the divorce proceedings. Much of the answer depends on what type of retirement plan or benefit is being questioned.
Alabama Law
According to Alabama law §30-2-51, a judge has the discretion to include the present value of any future retirement accounts or benefits that one spouse has a vested interest in or is currently receiving if certain conditions have been met, including:
- The parties to the divorce have been married for a period of at least 10 years during the time period in which the retirement plan or benefits were being accumulated;
- Retirement plans or benefits acquired prior to the marriage are not subject to division in divorce proceedings, nor is any interest or appreciation of benefits on such accounts that may have been accumulated during the marriage; and
- The amount of the retirement plan or benefits being awarded to the non-covered spouse may not exceed 50 percent of the entire retirement account and/or benefits being considered by the court.
In other words, retirement accounts and benefits are divisible in Alabama if you have been married for at least 10 years and the account was not maximized prior to the marriage. If you meet those requirements, the court has the discretion to award up to 50 percent of the accrued value of the retirement account and/or benefits to the spouse requesting such division. Much of whether or not the court will use such discretion will likely center on the ability of the covered spouse to pay out of such accounts and/or benefits and the need of the requesting spouse to obtain such accounts and/or benefits.
Proving Value
Proving the present value of a retirement account or retirement benefits can be difficult and may require you and your attorney to hire an outside accounting expert. This task is especially difficult in long-term retirement accounts or benefits that the covered spouse began accruing prior to the marriage. However, it is a necessary step to bring retirement accounts or benefits into play during a division of property and assets in divorce. Once the court has been satisfied that a retirement account or benefits are qualified for division during the divorce proceedings, the court will issue a Qualified Domestic Relations Order (QDRO) relative to that account or benefits. There are potential tax consequences involved with such orders, and it is important that you speak with your attorney to better understand them.
Indivisible Accounts
Some retirement funds may choose not to cooperate with the court’s order, and may actually not have to. It will be up to the attorneys involved in the divorce to determine the type of account in question and whether or not the holder of the account or benefits will cooperate with an Alabama judgment to divide that retirement account and/or benefits. In cases where the holder of the account or benefits will not cooperate with a court order to divide the account and/or benefits in a certain way, the attorneys involved in the case will often need to revisit the division of other property involved in the divorce to compensate for the lack of division of retirement accounts or benefits.
Military retirement accounts or benefits are also tricky when it comes to dividing them in a divorce. Similar to a QDRO for more traditional retirement accounts and benefits, division of a military pension requires a Military Pension Division Order. However, to obtain such an order, a divorcing couple must meet the following requirements
Legal Assistance with Retirement Accounts and/or Benefits
Planning for retirement is an important process. As you can see, there are many nuances to division of retirement accounts and/or benefits. It is important that you understand the process involved in dividing such assets, and that your divorce attorney follows the proper procedures during the divorce process to ensure that such division complies with Alabama or federal law. If you have questions about how divorce may impact your retirement account and/or benefits, contact Alabama Divorce & Family Lawyers, LLC to schedule a consultation about the questions you have regarding division of such assets in divorce.