Ending a marriage can be a stressful and difficult process, and there has been significant growth in divorces among adults over 50. According to the National Center for Family & Marriage Research, the divorce rate for this age bracket doubled between 1990 and 2010. Older individuals are much more likely to have retirement accounts, and many people do not realize that they are entitled to a share of those assets in a divorce. In California, retirement accounts are considered community property as outlined in sections 760 and 771 of the state’s Family Code.
Rather than focusing on material possessions like homes, jewelry and cars, it may be more prudent for someone going through a divorce to claim a share of his or her spouse’s retirement benefits. Generally, retirement assets that qualify as marital property can be divided in a divorce agreement. If, however, a spouse enters the marriage with money already in a 401(k), those funds are considered separate property.
In states with community property laws, all property obtained during a marriage, with a few exceptions like gifts and inheritances, is equitably divided by a judge in a divorce. The distribution is based on the time period for which a couple was married, the respective wage earnings of both parties and possession. There are exceptions if the couple signed a prenuptial agreement prior to marrying.
A divorce requiring equitable distribution of marital property can be complicated. Individuals going through the process might benefit from retaining a divorce attorney who could draft a Qualified Domestic Relations Order for an asset split. This legal document helps to protect individuals from owing taxes when retirement funds are transferred between parties in a divorce.
Source: SFGate, ‘What Is The Community Property Law in California,” Tricia Chaves
Source: Forbes, “The Big Money Mistake Divorcing Women Make“, Kerry Hannon, July 03, 2014