When spouses are going through a divorce, their marital assets need to be divided. Yet, not all marital assets are tangibly a couple’s possession at the time of the divorce. They still could be very valuable, but that full value may not be realized until later.
An example of this phenomenon involves a pension plan. A person working for a company has been earning a pension the entire time they’ve been employed, but they do not get paid this benefit immediately. It’s an asset for the future to be used during retirement – which could be years or even decades later.
A Qualified Domestic Relations Order
The formal division of this kind of marital asset involves a QDRO, which is a qualified domestic relations order. This resource gives the court the ability to determine in advance how that pension plan should be split up. Once the person who is earning it retires and starts collecting payments, the divided plan will send a pre-determined percentage to their ex.
The reasoning for this is simply that a pension is a marital asset, just like other earnings – salary, bonuses, etc. Just because the employee has not received the balance of their pension yet does not mean that their ex should get 0% of that asset during divorce. A QDRO allows the court to divide it properly.
How is division calculated?
Numerous factors are involved in the calculation process, but the two biggest things to assess are how long the marriage lasted and how long the employee was earning the pension during the marital period. Generally, an employee’s ex will get half of the pension plan that was earned during the marriage.
For example, perhaps the employee worked for 30 years to earn the pension. They were married for 15 of those years, but are now getting divorced. Their spouse would only qualify for 50% of the portion of the pension earned during the marriage – which, in this example, is already half of the total pension. Using a QDRO calculator, this means that their ex would receive 25% of each monthly paycheck.
Again, this percentage isn’t used in every single case because each is unique. But this gives you a good idea of how the court looks at this process and shows why it’s so important to understand the legal resources available to you if you’re divorcing. With that said, seeking legal guidance to receive personalized feedback is always an option as well.