RETIREMENT/DEFERRED COMPENSATION

Often, one of the largest assets to be divided in a dissolution action is a retirement benefit. Generally, to the extent that the benefits were accumulated during marriage, they are divisible as a community property asset. This division is appropriate even if the retirement assets are not yet payable to the employed spouse.

Other Types of “Deferred Compensation” Assets

In addition to traditional retirement plans, there are a number of other “deferred compensation” assets that are divided as community property. These deferred compensation assets include profit sharing plans, 401(k) and 453b plans, TRESOPs and TSP’s earned during marriage.

Generally, traditional retirement and other deferred compensation assets can be awarded in a pro rata share to each spouse. This division can be accomplished tax-free by means of a “Domestic Relations Order”. In other words, the employed spouse will not be required to withdraw assets and pay the taxes on the withdrawal to provide the other spouse with his or her share.

Stocks options, bonuses, accumulated sick leave or vacation pay earned during marriage can also be divided by the court. However, the tax-free division may not possible. Similarly, Individual Retirement Accounts (IRA) standing in the name of either party are regularly divided in a dissolution judgment. When the account standing in the name of one party is larger than those titled in the name of the other party, then a tax-free transfer can be made from one IRA to the other to equalize the division.

Call Our Experienced Lawyers

The Law Offices of Beatrice L. Snider, APC is well familiar with the division of the various types of deferred compensation assets. We can assist the client in obtaining consultants or experts in effectuating a division that avoids or limits potential tax consequences. Contact our San Diego divorce lawyers to discuss your case and legal options.