As we’ve discussed before, when Minnesota couples divorce, their assets must be divided.
This process is known as equitable division and it requires that the couple’s joint marital possessions be fairly, though not necessarily evenly, split up. Most people understand that this will require divvying up the house, the cars, the bank accounts and even the furniture. Retirement accounts must also be divided and while 401(k)s or Roth IRAs might seem obvious, pension plans are more easily overlooked.
Why are pensions overlooked?
One reason that some people forget about the value of pensions when dividing assets in a Minnesota divorce is that this money is usually not accessible immediately and can only be collected upon retirement. However, just because an asset cannot be collected until retirement does not mean it should be excluded from the equitable division process.
Is it vested or not?
In other cases, the issue of whether a pension has vested or not comes into play. When a pension is fully vested, it means that all of the things that needed to happen before the beneficiary can begin receiving payouts have occurred. When a pension is unvested, then the money cannot yet be collected. The owner of an unvested pensions is said to have a future, rather than immediate, interest in the money. It’s important to understand that a future interest is still valuable and can still be divided in the event of a Minnesota divorce.
When should you stake a claim?
Some people whose spouses have pensions might think that they have to wait until their ex has retired before staking a claim to the money. That’s wrong. If your spouse has a pension that he or she contributed to during the marriage, you must raise the issue during the divorce. Choosing to wait until retirement will prove to be a costly mistake.
What portion is a marital asset?
Though the value of a pension can be considered a marital asset, it’s important to understand that only the value earned during the marriage will be included in the equitable division process. That means that if your ex had his pension for 10 years prior to marriage and you two have been married for another 10 years, only half of the pension will be considered a marital asset.
How is the money divided?
Once you’ve determined how much money is actually a marital asset, you will need to agree to a means of dividing the money. One approach is to wait until the party with the pension retires and then pay out half (or whatever percentage was agreed to) at the time of retirement. To accomplish this, you’ll need to draw up a Qualified Domestic Relations Order (QDRO), which will instruct the pension administrator on how to handle the division.
Another option is to divide the money immediately, by determining the pension’s present value. Though the money in the pension is not accessible, you can use other pools of assets to facilitate the split. For example, if your share of the pension comes to $50,000, rather than wait for retirement to collect the money, you can simply take $50,000 more of a different retirement account or out of the value of the house.
An experienced Minnesota family law attorney can help walk you through the difficult process of divorce, including offering advice on confusing financial issues such as alimony and helping negotiate emotional subjects like child custody arrangements. For more information on divorce in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 414-0398.
See Our Related Blog Posts:
What’s The Difference Between A Contested And Uncontested Minnesota Divorce?
Advice For Dividing Retirement Funds During A Minnesota Divorce
