Retirement accounts are one of the most significant assets in a marriage. Many men don’t often realize that these types of accounts can be divided, even if just one spouse contributed. California has community property laws that play major roles in deciding how much each spouse receives during the divorce.
Ultimately, many men view retirement savings as a representation of all of their hard work and understanding how these types of accounts are divided in California divorce is essential to protect overall financial stability.
California as a Community Property State
California is known to divide most martial property equally, including retirement contributions made during the marriage even after it dissolves. All contributions that were made prior to the marriage or after the separation are usually considered separate property, and don’t get factored into the division.
Challenges typically lie with deciding what is community property and what is separate. The role a divorce lawyer plays in this is making sure the evaluation of assets is as accurate as possible.
Types of Retirement Accounts Affected
The following accounts have the potential of being divided by the court: 401(k)s and 403(b)s, pension plans, IRAs, military retirement benefits, deferred compensation plans, and CalPERS and CalSTRS pensions. Each type of plan has specific rules and a lot of them do require calculations done through court orders.
Negotiating Offsets in Retirement Division
One strategy many men use to protect their retirement savings during a divorce is negotiating an offset, which means trading one marital asset for another of comparable value. Instead of dividing a 401(k) or pension, a father may agree to give up a larger share of home equity, a vehicle, or another asset in exchange for keeping his retirement account solely for himself. Offsets can be financially beneficial because retirement funds continue to grow, while other assets may not appreciate at the same rate. However, accurately valuing both the retirement account and the assets being exchanged is essential, and a miscalculation can cost thousands of dollars.
How Courts Determine the Community Property Portion
It’s common for courts to use a time rule formula to calculate the portion of community property that accrued during the marriage. For example, if you worked at a company for 20 years and your marriage was only for 10 of those years, then typically half of the benefit would be considered community property.
When it comes to pensions and their evaluations, they’re usually a lot more complex and require actuarial analysis. The benefit of using a proper attorney for your case is that they can help ensure that the calculations being done are accurate and that your property is actually protected.
Common Mistakes Made by Men During Retirement Account Division
One of the most common mistakes that men make during their retirement account division is believing the account is entirely theirs simply because their name is on it. It’s important to remember that your spouse is still entitled to certain portions of that money according to the law.
Another mistake made is forgetting to value the accounts properly. Typically, this is more likely to occur when attorneys aren’t used since one of their primary roles during the divorce is making sure all accounts are evaluated as accurately as possible.
Finally, signing agreements without fully understanding the long-term financial impacts is incredibly common during this process. The best way to avoid this is by consulting with your legal team before signing any documents, and making sure that they are properly reviewed before a signature is put down.
Seeking a Legal Team
The best way to avoid issues when it comes to retirement accounts is to seek the proper legal team/attorney to help work with you throughout the entire process. Men’s Legal Center based in San Diego has a team of experienced attorneys that are ready to help you through not only retirement accounts, but the overall divorce process. Make sure you reach out as soon as possible for a free case review.