Pensions & Retirement Accounts in a Divorce

In a divorce, the court must divide all marital property (i.e., assets generally accrued by either party during the marriage, including debts and liabilities) and award the property to each spouse. A trial court has “broad discretion” in dividing property, and the “division of marital property need not be equal, but must only be fair and equitable given the circumstances of the case.” Nelson v. Nelson, 25 S.W.3d 511, 517 (Mo. Ct. App. 2000). If a party disagrees with a trial court’s ruling and decides to appeal, an appellate court will only interfere with the property division  if it is “so unduly weighted in favor of one party that it amounts to an abuse of discretion.” Souci v. Souci, 284 S.W.3d 749, 754 (Mo. Ct. App. 2009). On appeal, the division of property is presumed to be correct, and the party challenging the division bear the burden of overcoming the presumption. Id. at 755.
In light of these appellate standards, it is absolutely paramount to obtain a favorable property division award from the trial court. More often than not, the biggest assets subject to division are real estate and retirement accounts. Retirement accounts often refer to funds (usually tax deferred) that do not vest until you are of retirement age, including but not limited to “traditional” IRAs, Roth IRAs, SEP IRAs, 401(k)s, 403(b)s, and most pensions. Other hybrid savings accounts, like college savings plans and health savings accounts, also fall within this broad definition. It is important to realize that the fact that these accounts may not have vested or matured does not deprive it of its character as marital property. In re Marriage of Ward, 955 S.W.2d 17, 20 (Mo. Ct. App. 1997).
A few factors can make the division of these assets difficult. First, the Court will often take into account the tax consequences of awarding some/all of one retirement account to one spouse versus the other (e.g., Roth IRAs are not typically subject to penalties/taxes unless it is an early withdrawal). Second, when the amount of retirement assets are not readily subject to an even division, it is difficult splitting accounts and deciding what each party should be awarded. Third, if the ages of the parties are different, then it drastically impacts when the parties may reap the benefits of the accounts.
It is also extremely important that the retirement accounts/pensions be divided in a legally correct way. To do so ,there must be a qualified domestic relations order (“QDRO”). A QDRO is an order that creates or recognizes the existence of an alternate payee’s right, or assigns to an alternate payee the right, to receive all or a portion of the benefits payable with respect to a participant under a plan. This means that there must be sufficient language in the divorce decree which adequately states that the other spouse has an interest in those funds. Failure to include the correct language can be costly.
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