Can Spouse Get Retirement Accounts in California Divorce?

By Mike Broemmel

The division of property in California divorce cases is governed by the community property standard. Community property means that each spouse is entitled to 50 percent of the assets accumulated during the term of the marriage, no matter which party bore primary responsibility for obtaining the property. The community property standard is applied to all types of assets involved in divorce proceedings, including retirement accounts. As a result, in California, a person possesses a legal interest in the retirement account of his spouse in a divorce case.

Community Property Standard

The community property standard assumes that both spouses contribute equally to a marriage, no matter who might earn the most money during the course of the marriage. Property owned before the marriage, obtained during the marriage by inheritance or gift, or obtained after the spouses separate is considered the separate property of each spouse, not community property. As a result, such property is not subject to division upon divorce under the community property law of California.

Division of Property at Time of Divorce

When a divorce case is filed in California, most of the property obtained by a couple while married can be divided, either by their own agreement or by order of the court. For example, bank accounts and other investments can be totaled up and distributed between the spouses in equal shares. Some assets cannot be so easily divided at the time of a divorce without negative financial consequences. A retirement plan, with penalties for early withdrawal, represents one type of asset that often cannot readily be divided at the time of a divorce case.

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Property Settlement Agreement

In California, courts prefer spouses reach a settlement in divorce cases. In such a circumstance, the parties enter into a property settlement agreement, a contract that spells out how the assets and debts of the parties are to be divided, including any retirement plans. A spouse can agree to waive an interest in a retirement plan, which can be done in exchange for a larger share of another asset or an increase in alimony. A divorce court approves a property settlement agreement provided that the contract appears fair to both spouses.

Property Division and Judge's Discretion

Absent a property settlement agreement, a judge must exercise his discretion in determining how the property of the parties is divided. The judge must generally follow the parameters of California's community property law, but can make some adjustments in the interests of justice and fairness. As with a property settlement agreement, the judge's order will divide any retirement plans.

Qualified Domestic Relations Order

Avoiding the penalties associated with an early withdrawal from a retirement plan is accomplished through the use of a Qualified Domestic Relations Order, or QDRO. The QDRO establishes the percentages of retirement benefits that are paid to each spouse when the plan reaches maturity.

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Equitable Distribution Law for Divorce in Maryland

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The 401(k) and Divorce Law in Arizona

Community property states, such as Arizona, view assets acquired during a marital relationship as equally shared between spouses. Because Arizona is a community property state, family law courts generally distribute marital assets equally among spouses upon divorce. Property subject to division upon divorce includes real estate, bank account funds, personal property and retirement accounts such as a 401(k).

How Is Debt Split in a Divorce in California?

During a divorce, many couples focus on the division of community assets and often don’t realize that marital debt is also divided when a marriage is dissolved. In California, property obtained during the marriage is considered jointly owned by both spouses and may be subject to division in a divorce settlement. Divorcing spouses are also liable for community debt incurred during the marriage, and the court will determine the most equitable division of these liabilities.

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The laws of each state govern the division of property in a divorce. Although many divorces result in a 50/50 division of assets, family circumstances may bring about a different percentage, depending on the judgment of the court. If you have saved money in a 401(k) arrangement with your employer, the court will assign a portion of those assets to your spouse during the proceedings. It's important to follow the proper steps and obtain a valid QDRO to avoid IRS penalties.

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