Community property in California includes contributions made to retirement plans during a marriage. You and your soon-to-be ex-spouse may need to discuss dividing proceeds from a pension or an IRA as part of your divorce decree.
As noted by Kiplinger’s Personal Finance, retirement plans generally provide benefits to ex-spouses. Because the law views pensions as jointly owned assets, former spouses may receive payments for the duration of their working spouses’ lifetime.
Could a retirement plan serve as a negotiation tool?
If you contributed to a retirement plan through your employer, you may need to divide its current value in half with your ex-spouse during your divorce. Depending on your circumstances, however, you could have options that provide you with some bargaining power. You may, for example, successfully negotiate a settlement that leaves you with full ownership of your retirement account.
A review of your plan’s account statements could give you its current fair market value. By dividing this amount in half, you may determine how much each spouse would receive upon liquidation. Since retirement plans have strict rules on selling assets, you may instead use your plan’s value as a trade for another item in your community property.
Do I need to divide an IRA received as an inheritance?
Although all assets obtained while married may classify as community property, if you received an IRA as an inheritance, it belongs to you as separate property. Your separate property generally also includes any gifts you received.
If you and your spouse signed an agreement that confirms a specified asset, such as a retirement plan, remains your separate property, the court may decide to leave it out of your divorce settlement.