Going through a divorce, you might wonder if your spouse gets part of your retirement benefits. Pretty important no matter what, but especially if you are nearing retirement age and didn’t factor in divorce as a life event. Here’s the bottom line, if you are going through a divorce, your retirement benefits are in direct line of taking a hit.

During the marriage both you contributed towards the retirement savings, and both of you were likely planning on enjoying the benefits. Contributions to the retirement savings is not always in the form of money. A spouse with a lower paying job or a non-working spouse may have contributed energy and time to the relationship, which includes taking care of the children and managing the home. Because Washington State is a community property state, retirement earned during the marriage must be shared – irrespective of who contributed more into it.

Couples sometimes ask about savings that occurred before the marriage. This is separate property and remains with the person who earned it.

Types of Retirement Benefits

Savings and investment plans
Benefits under this category are also called “defined contribution” plans. They include IRAs, 401(k) Plans, and Thrift Savings Plans. In this category of benefits, an employee deposits money into an account. Or in some cases, the employer contributes directly into the employee’s investment plan.

Pension or defined benefits
This category of benefits is usually funded by an employer or labor union. When the individual retires, a specified amount of money is deposited monthly into the retiree’s account for the remainder of the employee’s lifetime.

Dividing the Benefits

To have access to your plans, consult the financial institution responsible for the benefits. The Qualified Domestic Relations Order (QDRO) is an official order sent to the financial organization or the benefits administrator, which is used to divide a benefit between both spouses. For every retirement benefit that you are entitled to, you have to deliver a letter alongside the QDRO telling how the benefit should be divided. The QDRO basically tells the financial institution managing the benefit to create another account in the name of the other party or spouse. One advantage of this is that tax liabilities and other penalties may be avoided. You should talk to your lawyer about this.

Alternatively, one partner might buy out the other spouse with a reasonable and fair investment. For instance, the partner intending to buy out the other might compensate the other with cash, a house, or other property. This, of course, circumvents a lot of administrative and legal procedures, but it might incur some penalties and tax liabilities and needs to be solidly agreed upon by both spouses.

Chad Foster is a trusted family law and divorce lawyer serving Snohomish and King counties with an office in Bothell. Contact us today to discuss your legal issue.

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