In North Carolina, the court treats postal pensions like other retirement accounts during divorce. If contributions were made during the marriage, the court considers those proceeds to be marital property and subject to division. Unless you and your spouse reach your own property settlement agreement, the court will divide your pension equitably, based on the circumstances, which may result in an unequal split. However, the court can opt to award your spouse a greater share of marital property to offset your pension, allowing you to keep it intact.
In North Carolina, before a court can divide property between divorcing spouses, the court must first decide what is marital property and what is separate property. Marital property is property that either spouse acquired during the marriage, and is considered jointly owned. There are certain exceptions to this. Separate property is property one spouse received before the marriage or during the marriage by inheritance or gift. Generally, the court can only divide marital property in divorce, including any appreciated value of the property. On the other hand, separate property is not divided between spouses, but stays with the spouse who originally acquired it. North Carolina law considers pensions and other retirement benefits to be property. Therefore, if you acquired or contributed to your postal pension during the marriage, those proceeds are considered marital property and are divisible in divorce.
Once the court has identified all marital property, including your pension, it will divide this property between you and your spouse. North Carolina is an equitable distribution state. This means the court will divide your pension and other marital property in a way that is fair and just, which may result in an unequal split. To make this decision, the court will evaluate a variety of factors set forth in state law. Factors include the duration of the marriage; each spouse's income, debts and property; any support obligations from a prior marriage; contributions one spouse made to the other spouse's education or career; any expected retirement benefits that are one spouse's separate property; and any other circumstances the court finds relevant. In North Carolina, the court may award pension benefits in a lump sum or payable in fixed amounts over a period of time. However, the court rarely awards non-earning spouses more than 50 percent of a pension in divorce.
Once the court decides how much of your pension your spouse is entitled to receive, the court will execute a Qualified Domestic Relations Order, or QDRO. A QDRO is a court order that recognizes an alternate payee's right, such as a former spouse, to receive benefit payments from another person's pension or retirement account. Although the divorce decree will outline the property allocation between you and your spouse, most pension plans require the submission of a QDRO before they will authorize and distribute payments to someone other than the pension holder. Once the QDRO is in place and the plan administrator has approved it, your spouse is authorized to receive payment from your pension. However, when those payments will begin depends on the rules of the pension. In many cases, payment begins when the pension holder retires or otherwise becomes eligible for payment of benefits.
Although your spouse may be entitled to a portion of your pension, other arrangements can be made. For example, you can ask the court to give your spouse other marital property of equal value in lieu of your pension. This is often a preferred alternative, especially when the court has not scheduled benefit payments to begin until well into the future. Additionally, you and your spouse are free to create your own property settlement agreement rather than let the court make this decision for you. This means you and your spouse decide which property to divide between the two of you, if any, and in what proportion.
References & Resources
- North Carolina General Assembly: North Carolina General Statutes, Section 50‑20, Distribution By Court of Marital and Divisible Property
- Montgomery Family Law: North Carolina Property Division During Divorce
- North Carolina General Assembly: North Carolina General Statutes, Section 50‑20.1, Pension and Retirement Benefits
- U.S. Department of Labor: Frequently Asked Questions, Qualified Domestic Relations Orders
- Doyle and Doyle: Dividing Retirement Accounts in Divorce
- U.S. News: How Divorce Affects Retirement Benefits
- Comstock/Comstock/Getty Images