Saving up for retirement is a tedious process, but there is usually a predictable, well-defined path for doing so. Relationships do not benefit from such certainty. Some couples grow apart as they age, and the end result is a divorce. In such a scenario, what happens to your well-planned retirement savings? We know that assets are split during divorce proceedings, but how does the court handle a personal retirement account? In general, the division of retirement accounts is a complex, and can produce a variety of results depending on the situation.
Utah is a an equitable division state. This means that all marital property must be divided in a fair and reasonable manner. Retirement accounts are a type of marital asset that falls under the rules of equitable division. Thus, the court has the authority to split the funds in the account and assign a share to both parties.
Divorce, business law and estate lawyers can cite some general practices by the court when dealing with retirement accounts. The law treats any money paid into a retirement account while married as marital property. If both parties have paid into retirement account, the court may allow each person to keep their property. Yet, when one party has an account, and the other does not the court may split the value of the fund. In other cases, the court may allow the payor to keep the benefits, while substituting other assets to make up for the difference. The actual outcome will depend on the facts of the case.
There is one important case in Utah's legal history that affects the division of retirement benefits. The name of the case is Woodward v. Woodward. This case provides a formula for property division for spouses who are not able to reach a compromise in the matter.
The formula suggested by Woodward v. Woodward is a fairly simple calculation. First, the court will multiply the length of the marriage by one-half of the fund's total amount. Next, the resulting figure will be divided by the number of years the payor has been employed. The final value is the amount the court will award to the non-paying party.
It should be recognized that this formula is not necessarily the definitive method of calculation. The court may add in other factors to achieve a fair and reasonable resolution. An experienced attorney can help you determine how the court may proceed.
Interestingly, Utah courts do not address the division of a retirement account in the divorce decree. Rather, they use a Qualified Domestic Relations Order to carry out the mandate. This order is presented to the financial institution that maintains the retirement account. Once it is reviewed by the retirement plan's administrator, the proceeds may be distributed as ordered.
If you need help with a family law matter, such as divorce, contact T.R. Spencer Law Office today.