People preparing for divorce have to address a variety of different types of assets. The more successful the spouses have been during the marriage, the more complex their marital estate may have become. They may share an assortment of different types of investments, real property and a broad range of personal property as well.
They then have to make decisions about how to divide those resources in accordance with New Jersey’s equitable distribution statute. Assets, including real estate and investments, can have a direct impact on people’s financial stability after divorce. The same is true of pensions, which can provide ongoing financial support during retirement.
People preparing for divorce in New Jersey may worry about what might happen to a pension. Those who have accrued attention may fear losing a portion of it, while those divorcing someone with a pension may worry about having inadequate retirement resources. How does equitable distribution impact a pension?
There are several ways to split a pension
When one spouse has accrued a pension with their employer, there are a variety of potential solutions for addressing the pension during property division negotiations. Typically, the portion of the pension earned during the marriage is part of the marital estate. It is subject to division just like retirement accounts might be.
In some cases, the best solution for a pension is to have the spouse entitled to pension benefits buy out the other spouse. This process entails calculating how much of the pension is marital and then determining how much of that should reasonably belong to the other spouse. The spouse entitled to pension benefits then provides a lump-sum payment to the other spouse to buy out their interest.
Other times, it might be possible to use a qualified domestic relations order (QDRO) to actually split the pension. This allows each spouse to receive a portion of the pension payments directly from the party distributing those funds during retirement.
Splitting a pension isn’t always necessary
Spouses who try to settle their own property division matters may determine that actually splitting the pension is not the most effective solution. In some cases, it is possible to use other assets or responsibility for marital debts to balance out the retention of a pension. In other cases, agreeing to spousal support or alimony can be a way to balance financial matters when one spouse has accrued pension benefits during the marriage.
Divorcing spouses can potentially choose their own solution if they cooperate and pursue an uncontested divorce. Otherwise, a judge may decide the best way to address the pension during divorce proceedings.
Reviewing issues that are likely to complicate divorce negotiations, including retirement resources like pensions, with a skilled legal team can help people prepare. Spouses who understand the basics of equitable distribution can often approach property division matters reasonably.