Dividing Pensions in Connecticut Divorce
Greenwich CT High Asset Divorce Attorneys
Many CEOs, managers and executives often overlook the fact that their pension and employee retirement benefits are considered marital property, even if those benefits will not be received for some time until they reach retirement age. Pensions are not automatically split upon a divorce. It is crucial to remember that retirement benefits must be valued as a part of the divorce process. The valuation of retirement benefits is imperative as they can be one of the most valuable assets a couple shares while married.
Connecticut law says that the benefits earned by a husband or wife during a marriage are considered marital property. This means that the Connecticut court system has the power to assign either the husband or wife all or any part of their estate. A Connecticut judge could award a fraction of or all of a pension to a spouse as a result of the divorce process.
However, although the Connecticut courts have power to reallocate property of both spouses that does not suggest that either party automatically has ownership interest in the property of the other spouse. There are several factors that go into deciding how marital property such as retirement benefits and pensions should be distributed during a divorce. Important factors considered include: the reason the marriage is ending, the length of the marriage, the income of both spouses, earning capacity of both spouses and the opportunity for each spouse to acquire future assets.
Connecticut Retirement Benefits and Pension Valuation
Retirement benefit and pension valuation is a common part of divorce in the state of Connecticut. At The Prince Law Group, LLC, we work diligently with our clients to value defined contribution plans, defined benefit plans or pensions and stock ownership plans so that they can be divided fairly amongst both spouses.
It is important to understand what the different types of retirement benefit plans include. There are three main categories of retirement plans: defined contribution plans, defined benefit plans or pensions and stock ownership plans.
Defined contribution plans include Individual Retirement Accounts (IRA’s), profit sharing plans, 401(k) plans and 401(b) plans. Usually within these plans, the participant maintains an account in which the employer and employee both make contributions. When an employee leaves the company or retires he or she has the option to withdraw the entire balance or make periodic withdrawals. During the divorce process a defined contribution plan is easy to value because the value is simply the current account balance.
Defined benefit plans or pensions give an employee a defined monthly retirement income once they reach the determined retirement age. The retirement compensation is usually calculated based on the employee’s length of employment, final salary and the age of the employee at the time of retirement. Valuing a pension can be a complex procedure. It includes the duration of the marriage to the number of years at the employment also called a coverture share. It is recommended to seek the assistance of an experienced divorce attorney determine the most accurate value. At The Prince Law Group, LLC, we have experience with U.S., Canadian, United Kingdom, Swiss, German; and other foreign pension plans.
Another type of retirement benefit is a stock ownership plan (ESOP). Stock ownership plans are similar to defined contribution plans. The main difference with these plans is that the contributions are in the form of company stock. The valuation of stock ownership plans during the divorce process is broken down similar to the valuation of pension plans. Publically traded stock information is reported daily and corporations are required to value their stock annually. Spouses may decide to split their stock ownership plan with a Qualified Domestic Relations Order (QDRO), which will dictate how the benefits will be divided as part of the divorce property division.
There are other types of unique retirement plans that do not fall under any of the above categories. An example is a deferred compensation plan. Within this type of plan the employee is allowed to defer a portion of his or her gross income to a retirement plan. This type of a deferral is tax exempt from federal income tax purposes until the proceeds are distributed. At The Prince Law Group, LLC, we value all retirement plans and assist the couple on the most fair and equitable method of distribution of this marital asset.
Connecticut Marital Property Division
The Prince Law Group, LLC has over 25 years of combined experience helping clients with family law issues such as valuing retirement benefits, pensions and the effects of QDROs and tax consequences. Our experienced Stamford family law attorneys can answer questions about how your retirement benefits or pension will be divided during the divorce process. We have the resources to determine the most accurate valuation of your benefits. Call 203-653-8483 or fill out the online contact form to schedule an initial consultation.