Decision Time: 2 Ways A Court Divides Community Qualified Private Retirement Benefits
Now that the court hearing your divorce case has been presented with all the necessary evidence on the factors it must consider in making a just and right division of your retirement benefits, it’s finally time to determine how those benefits will be divided and awarded to each spouse.
2 Ways A Court Divides Community Qualified Private Retirement Benefits
There are two common methods the court relies on to divide Qualified Private Retirement Benefits:
Partition retirement benefits in kind
The term “in kind” essentially means that retirement benefits are divided fairly and justly between the spouses. Per the Texas Family Code, this process does not always require splitting the benefits in half but can also involve the trial court awarding parts of it to each spouse.
With a defined-contribution plan, the plan’s benefits and survivorship rights must be partitioned in the following ways:
1. Partitioning outright to the participant spouse – To compensate the nonparticipant spouse for her lost interest in the retirement benefits, the court can award her a money judgement or other community asset. OR
2. Awarding a percentage to each spouse – Benefits in a defined-contribution plan that are community property can be partitioned by assigning a percentage or dollar amount of the benefits to each spouse.
Conversely, to work within the framework of a defined-benefit plan, the following items must be partitioned:
1. The plan’s benefits
2. Postdissolution plan adjustments
3. Survivorship rights
4. The right to name a beneficiary
From there, the benefits in a defined-benefit plan that are community property can be partitioned in the same manner as benefits in a defined-contribution plan.
Award money judgement
This is the second option, and as stated above, if the community’s interest is partitioned entirely to the participant spouse, a court can order that the nonparticipant spouse be awarded an offsetting money judgement. Most defined-contribution plans offer participants the ability to borrow against their retirement benefits, enabling them to buy out a nonparticipant’s interest in the benefits.
Was this blog helpful? We’ve been discussing the details behind community qualified private retirement benefits in our last few blogs. If you missed them, please click on the links below to get caught up.
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