Family Law Attorneys Representing Individuals in Atlanta
When couples divorce, one aspect of the resulting decree is the division of marital assets. In Georgia, marital assets can include not only real and personal property but also bank accounts, investments, and pension plans, which can often be very valuable. However, properly dividing pensions can be complicated. At the Law Firm of Thomas C. Rowsey, our family law lawyers have extensive experience assisting clients in the Atlanta area with complicated matters, including how to divide pension plan benefits in divorce. We proudly serve individuals from communities throughout Fulton, DeKalb, and Cobb Counties, including Roswell, Alpharetta, and Sandy Springs.
Dividing Pension Plans as Marital Assets
In Georgia, marital assets are divided “equitably” between the spouses in divorce. Equitable does not mean “equal” but “fair.” Pension funds constitute marital assets subject to division if marital assets were used to create or fund them.
Today, there are many different types of pension or retirement plans. It is also not unusual for people to have several different types of retirement funds, such as both a pension and an IRA. A typical employer-administered plan might be a “defined contribution plan,” such as a 401(k) plan in which an employee contributes an amount to his or her own retirement account, and the employer matches a portion of those funds, which usually vest over a period of time. Employees can then invest the funds in stocks, bonds, or mutual funds.
An alternate type of pension is a defined benefit plan, in which the amount of the retirement benefit is based on a formula applied at the time of retirement. That calculation may involve the number of years worked, the salary earned at the time of retirement, and other factors.
Depending upon the type of plan, valuing a pension fund is not always easy, and there are several considerations that can complicate valuation. For example, if a spouse contributed to a pension prior to the marriage, some portion of the funds (both contributed and accrued or earned) might be separate rather than marital property. In addition, an employee often has no present right to the funds, only a future expectation, and it is not always easy to determine what that expectation may be, particularly for a defined benefit plan.
Several methods of accounting may be applied when trying to value a pension fund, and these different methods can yield varying results. It is important to make sure that any valuation put forward for the purpose of division of assets in divorce is based upon sound methodology.
The portion of a divorce decree dealing with the division of pension plan funds between the spouses is called a Domestic Relations Order. A court will often issue a “Qualified Domestic Relations Order,” or QDRO, which is issued to the pension plan administrator. Once the plan administrator approves a QDRO, changes or transfers can be made in accordance with the order. However, it is important that any order regarding a payout or transfer of benefit funds meets all IRS rules and the rules of the pension plan itself. Distributions that fail to comply with these rules can result in unpleasant tax consequences.
Today, many retirement plans have provisions in place for making direct payments to an ex- spouse pursuant to a QDRO, but some do not. In those cases, pension plan benefits awarded to an ex-spouse will likely have to be transferred from the ex-spouse once benefits begin.
Finally, not every asset must be split to achieve an equitable division of assets. For pension plans in particular, one of the spouses or the court may decide to leave an existing pension plan unmodified and allocate other marital assets to a spouse in lieu of pension plan benefits.
Seek Legal Representation in Atlanta for Matters Related to Your Divorce
If you are currently facing a divorce that involves complicated assets like pension plans, you can call an experienced attorney at the Law Offices of Thomas C. Rowsey for assistance. We can evaluate what options you may have and take steps to help protect your financial future. Call us today at (770) 993-5317 or use our online form to set up a consultation.