How Are Pension And Retirement Accounts Distributed?
Pensions and retirement accounts are generally divided using what is known as a Qualified Domestic Relations Order, otherwise known as a QDRO. This is a special order specifically directing the retirement or pension provider to divide the retirement account into, and essentially maintain, separate accounts from that point forward. When the distribution of the retirement or pension accounts begins to occur, each side will get a portion. Additionally, the original owner of the pension or retirement account may continue to contribute to their account. QDROs, particularly with pensions or defined benefit plans, can be tricky to draft. Many attorneys delegate that task out to specialists, attorneys who specialize in drafting QDROs.
In the state of Utah, there is a case called Woodward that set forth a formula of how the QDRO should divide their retirement account. The Woodward formula takes the total number of months of service during the marriage as a numerator over the total number of months of service at the job. Then the QDRO would divide the retirement account, and allow division of the account not to be a taxable event, subject to early withdrawal penalties. It would be the number of months during the marriage versus the total number of months that the party receiving the retirement account was at that job. That said, the court has the discretion to not use the Woodward formula, if it chooses to reach an equitable property division in some other way.
For example, the entire retirement may be awarded to one party, while all of the equity in a marital home is awarded to the other party if they’re roughly equal. The court will take into account the tax consequences of dividing and selling the property at the time of the divorce, but will not speculate about hypothetical future tax consequences. In other words, only the tax consequences existing at the time of the divorce will generally be considered.
What Other Factors Does A Trial Court Consider During Property Division?
The courts might consider how the property division will impact the future lifestyle of each party and might consider how the property division will impact the stability of the children, how it will impact the alimony, and how it will impact the party’s ability to finally go their separate ways.
If My Spouse And I Agree On How We Should Divide Our Property, Do We Have To Go To Court?
More often than not, if the parties are able to reach an agreement regarding property division, that is a better scenario, so long as the division is roughly equal. The parties are free to trade debt, property, and alimony awards around with each other until they reach an acceptable division of all of those things as a whole. An agreement can be reached through mediation, a written agreement between the parties, or in settlement negotiations between counsels. It could even happen on the courthouse steps right before trial.
The parties do not have to rely on the court to make the division if they can reach an agreement. The Law Office of Kelly Peterson regularly handles property division in connection with divorce, settlements, and trials. Feel free to call us today if you have issues in this area that need resolution.
For more information on Division Of Pension & Retirement Accounts, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (801) 616-3301 today.