How to Divide Retirement in a Divorce

How to Divide Retirement in a Divorce

The Supreme Court of Utah in June, 2014, specifically addressed the question of “how to properly determine the amount of the employee spouse’s monthly benefit subject to equitable distribution.” See Johnson v. Johnson (2014 UT 21). Divorce lawyer in utah

To clarify a bit,  In a divorce, if you or your soon to be ex-spouse has retirement, the marital portion of that retirement may be divided as part of the marital estate.  That means that any retirement you earned while married is considered marital property and can be subject to being split. Attorneys in ogden utah

In some cases a person does not know what the monthly benefit from his/her retirement will be until the date of retirement.  Which date could be years away. Attorneys in ogden utahAttorneys in salt lake city

This raises a few questions, most importantly how much of the monthly benefit will be awarded to the nonemployee spouse, but also what is the “marital portion” of this retirement benefit, and to calculate that we need to know the time of the marriage and the amount of the benefit. Divorce attorneys in utah

In previous cases the Supreme Court has used the time rule formula to determine the percentage of the retirement that the nonemployee spouse will receive based upon the length or duration of the marriage. Attorneys in ogden utah

How to Divide Retirement in a Divorce

To determine the percentage you divide the number of years (or months) employed and earning toward pension during the marriage, by the number of years (or months) of total service (employment) in which the pension was accruing. Divorce utah right to know

Example: Let’s say you were married for 7 years, and worked for 10 years, and during all of this time you were accruing a pension. Then the percentage would be:

84 months / 120 months = 0.70 or 70%

But you would be wise to ask 70% of what amount? And will the amount include any INCREASES to the monthly benefit that happen after the divorce?

The Supreme Court provided an answer to this question.  The court stated that a Context Specific Approach was required to answer this question or in other words a case by case basis.  The Court went on further to explain that in determining the monthly benefit amount courts should consider the followoing:

  • The extent to which the property was acquired during the marriage.
  • The ultimate source of the property.
  • How the employee spouse’s career intersected with the marriage.
  • The extent to which the marriage contributed to the employee spouse’s pay grade at retirement.

In other words, the monthly benefit amount could be the amount at the time of divorce OR the amount at the time of retirement, including any or all increases to the benefit, depending upon the circumstances of your case.

It is important to remember that if you are negotiating an agreement with retirement division that requires a future percentage and monthly benefit amount, you should consider the above factors and stipulate to the benefit amount that will be used in any calculations.  This may be a number, or this may include a way to determine that number in the future after retirement.

Why does this matter?

Using the example above, if the monthly benefit amount is determined at the time of divorce and your pay grade allows you a $100 monthly benefit upon retirement, then the amount the nonemployee spouse will receive is:

$100 x 70% = $70 per month

On the other hand, if the monthly benefit amount is determined at the time of retirement and there have been increases which increase your pay grade to a $200 monthly benefit, then the amount the nonemployee spouse will receive is:

$200 x 70% = $140 per month

These calculations can be tricky and confusing, but it is so important to consider in the division of the marital assets and debts.  If you have questions about the division of retirement in your case, please schedule a free consultation with one of our attorneys with Stevens & Gailey, P.C.

How to Divide Retirement in a Divorce

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