Divorce Law for Pensions & Percentages in Alabama

by Heather Frances J.D. Google
Pensions have special distribution rules.

Pensions have special distribution rules.

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When Alabama spouses divorce, they must divide their property — or allow the court to decide how it should be divided. Alabama courts may consider pensions and other retirement benefits to be marital property, subject to division in a divorce. However, pensions are treated a bit differently than other property since they cannot be divided unless the spouses were married for at least 10 years.

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Property Division

When Alabama spouses do not agree on how to divide their property, the court uses its discretion to divide marital property equitably between them, though not necessarily equally. Alabama courts cannot consider a spouse’s separate property — property acquired before the marriage or during the marriage by inheritance or gift — when allocating property to each spouse unless a spouse proves the separate property was regularly used for marital purposes during the marriage.

10-Year Rule

A spouse’s pension, to the extent that it is earned during the marriage, is a marital asset a judge can split during a divorce. However, Alabama law does not allow judges to divide any retirement benefits unless the spouses were married for at least 10 years during the time when the retirement benefits were being accumulated. However, the court cannot award any portion of retirement benefits earned before the marriage, including any interest applied to those benefits, since they are considered the separate property of the spouse who earned them.

Awarding a Pension

If spouses meet the 10-year rule, Alabama courts can award up to 50 percent of any retirement benefits earned during the marriage to the non-earning spouse. The court doesn’t actually have to award a share of the pension itself. Instead, the court can award another marital asset with the same value. For example, the court could award $10,000 from a joint bank account instead of $10,000 from the spouse’s pension.

Disbursing a Pension

When the court awards a portion of a pension to a spouse, there are generally two options for disbursement of that share. First, a spouse can immediately withdraw her share after the divorce is final, but this can lead to heavy taxes and penalties for the early withdrawal. Second, the receiving spouse can wait until the pension vests to receive her share under a qualified domestic relations order (QDRO) from the court. The pension plan administrator can then disburse the court-ordered amount of the pension to the receiving spouse.