If you’ve worked many years putting money into your pension for retirement, the last thing you might want to do is give it all away to your soon to be ex-spouse.
If you want to hold on to your pension, or at least a good portion of it, it’s important to know the basics about how pensions are divided in a New Jersey divorce. In addition to consulting with a competent divorce and family lawyer, take note:
1. The overwhelming likelihood is your divorce will settle out of court.
Only about 1% of all divorce case filed in New Jersey go to trial. Therefore, you can create your own options for dividing the marital pension and retirement benefits with your spouse.
For example, you might keep your pension intact if your spouse is agreeable to offsetting it with other comparably valued assets like the marital home.
2. Traditional pension plans are divided differently than other types of retirement plans.
Before pensions or other types of retirement plans can be divided, however, they need to be valued. In New Jersey, marital assets are generally valued as of the date on which a divorce complaint was filed with the Court.
Traditional pension plans (called “defined benefit” plans) promise a specified monthly benefit at retirement. Examples include military, police and fire, and teachers’ pensions.
To find out how much your pension is worth in divorce, the most accurate way is to retain an outside actuary or accountant to calculate the present value of the marital portion to be divided.
On the other hand, retirement assets such as 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans are generally valued as of the account statement closest to the date on which the divorce complaint was filed.
3. The portion of a pension or retirement plan that predates the marriage is typically exempt from being divided in divorce.
It’s therefore important to quantify the value of any premarital portion, which would include any gains and/or losses on that premarital portion.
If your premarital portion is significant, it might make sense to retain an outside accountant or actuary to value your premarital interest and any gains on that interest.
You’ve worked hard to save for your retirement. Don’t simply assume you’ll have to give it all away in divorce. Instead, find out your rights and options by consulting with a competent lawyer who focuses on New Jersey divorce and family law.
If you are concerned about dividing your retirement assets in divorce, please contact us to schedule a time to meet for a complete evaluation and customized strategy to address your concerns.