How Much of My Pension Can I Lose in a Divorce?

If you plan to file for divorce or have been served divorce papers, you may be worried about what will happen to your retirement savings or pension plan. Below, we will discuss community property laws, what can happen to your pension plan, and actions you can take to protect it from division.

Are Pensions Considered Community Property in California?

California is a community property state. In community property states, the property a couple acquires during their marriage is subject to division, because it legally belongs to you both. Community property includes:

  • Debt you incur while married
  • Anything you earn while married
  • Anything you purchase with marital funds

How Are Pensions Split in a Divorce?

Community property is divided equally (in half) in divorce cases. Your spouse has a right to part of the money in your pension plan. Any income or interest accumulated in a pension or 401(k) is considered community property. A popular method used to determine your spouse’s community property interest is the “time rule, “ which involves:

  • Dividing the time you have worked for a company (and accrued interest in your pension) by the total time you were married.
  • Multiplying that total by your accrued pension benefits
  • Multiplying that total by 50%.

For example, Danny worked for D&D Company for 30 years, and for 20 of those years, Danny was married to Sophie. 20 divided by 30 is 0.66. Danny’s pension benefits is valued at $10,000, so you would multiply $10,000 by 0.66, which is $6,600. This total multiplied by 50% is $3,300, which is the community property interest.

How to Protect Your Pension in Divorce

There are some ways you can protect your pension and/or retirement accounts. To prevent your spouse from taking a large part of your pension, you can:

  • Draft a pre- or post-nuptial agreement. A pre or postnup is a legally binding agreement that includes details about how assets and debts will be divided if you and your spouse get divorced. If neither party has filed for divorce yet or you are not married, you can protect your pension with a marital agreement.
  • Settle out of court. To avoid having a judge determine how your property is divided, you and your soon-to-be-ex-spouse can reach a settlement yourselves via mediation or other alternative resolutions. You may be able to negotiate with your spouse to protect your pension and keep the majority of its funds to yourself.
  • Review the terms of your plan. If you have a public pension plan, you may have difficulties removing your ex-spouse as a beneficiary even after you are divorced. Even if your ex-spouse already received a small portion of your pension in a divorce settlement, they can receive a large portion if you pass away before them. To remove a beneficiary from a public pension plan, you will need to file a court order to request the change, and it is best to file this order during your divorce proceedings.

Comprehensive Legal Representation

At The Neshanian Law Firm, Inc, our attorneys have over two decades of combined legal experience.Dividing assets and debts in a divorce can be challenging, which is why you should retain our reliable attorneys. We can help you determine whether certain assets are separate or community property, develop a strategy to protect your assets, and advise you of your best legal options.

If you are getting divorced, we can help you protect your interests and understand how your pension and other assets may be divided. Contact our team online or via phone (949) 577-7935.