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Learning More About Dividing Retirement Benefits in Divorce

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Learning More About Dividing Retirement Benefits in Divorce

DATE: September 26, 2018
Category: Divorce
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Getting divorced in Michigan is a complicated process for any couple regardless of their assets and debts. However, the divorce typically becomes more complex when there are significant marital assets that will need to be divided. Whether the parties are younger or older and nearing retirement, the prospect of dividing retirement benefits can feel frustrating and daunting. For example, what happens in a case where one of the spouses was the primary earner and has retirement benefits that he or she was relying upon for retirement? Or, differently, what do courts do when both parties were relatively equal earners and both were paying into retirement accounts during the course of the marriage?

Every divorce case is different, and it is important to work with an experienced Michigan divorce lawyer when you are dealing with complex assets and different types of retirement benefits. In the meantime, we will tell you more about how the division of retirement benefits can work in a divorce.

What are Retirement Benefits?

When we talk about dividing retirement benefits in a Michigan divorce, what kinds of assets are we referring to? There are many different types of retirement benefits, but generally speaking, those that are covered by the Employee Retirement Income Security Act (ERISA) fall into one of two different types of pension plans:

  • Defined benefit plans; and
  • Defined contribution plans.

Retirement benefits such as 401(k)s, 403(b), Employee Stock Ownership Plans (ESOPs), and profit-sharing plans are all types of defined-contribution plans. Retirement benefits can also include individual retirement accounts (IRAs), Simplified Employment Pension Plans (SEPs), Money Purchase Pension Plans, and Cash Balance Plans. Any of these types of retirement benefits can be subject to division in a divorce.

Are Retirement Benefits Marital Assets?

Generally speaking, any assets acquired during the marriage in Michigan are considered to be marital assets. As such, for many couples who have been married for decades, retirement benefits are likely to be primarily marital assets. For example, if a couple got married when they were in their early 20s just as one or both of the spouses began a career, then the entire retirement account (or accounts) would have been acquired during the marriage. In such a situation, even if only one of the spouses has been working throughout the marriage and has retirement benefits, those benefits are classified as property of the marriage and are divisible.

The question of whether retirement benefits are marital assets gets more complicated when a portion of the benefit was acquired prior to the marriage and a portion afterward. The court considers such issues on a case-by-case basis and may be able to divide out what is marital property and what is separate property.

In general, if both spouses have retirement benefits of relatively equal value, the court is likely to allow each spouse to keep his or her benefits. When only one spouse has retirement benefits, equitable distribution can mean that the spouse keeps his or her retirement benefits and the other spouse is awarded assets of equal value from the marital property, or it may be possible to cash out retirement benefits so that they can be distributed.

Contact a Michigan Divorce Lawyer

Questions concerning retirement benefits and property distribution are complicated, but a Michigan divorce lawyer can help.

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2000 Town Center Suite 1625
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Suite 1625
Southfield, MI 48075

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