How will your retirement plans be treated during the course of your Ohio divorce? Below you will find some helpful information from Shannon Dawes of Dawes Legal, LLC, regarding a divorce’s effect on Ohio retirement plans.
Do retirement plans have to be divided?
Retirement benefits that you accumulated during your marriage are marital assets, according to Ohio law, so they will need to be divided between you and your spouse during any divorce or dissolution proceedings. The Ohio Supreme Court has found that, regardless of whether the retirement benefits are vested, unvested, or being paid out, the benefits are essentially deferred wages that need to be split with your spouse.
What retirement benefits will be considered?
Retirement benefits for purposes of property division can include 401(k) plans, defined-benefit plans, IRAs, Roth IRAs, federal public plans, and/or self-employed plans.
How will the value of my benefits be determined?
Generally, retirement benefits that include investments will be valued using investment statements. Monthly payment plans can also be valued using the present dollar amount of the anticipated future benefit. More likely than not, you will hire experts to determine the value of your retirement benefits and whether any portion of your benefits (pre-marital contributions, for instance) might be considered non-marital property that will not be subject to division.
How will my and my spouse’s benefits be divided?
Your retirement benefits can be divided in a few different ways:
- Each spouse can receive one-half of the marital portion of each retirement plan that exists between the spouses; or
- Each spouse can retain one whole plan while offsetting any inequities in value through division of another plan or division of one spouse’s plan; or
- One spouse can retain any or all plans by offsetting the value with other marital assets.
During both the valuation and division stages of retirement benefits, it is important to keep in mind the tax implications surrounding retirement accounts and payouts, particularly when one spouse has agreed to receive a money or property offset in lieu of splitting retirement benefits. Usually, retirement contributions are “tax delayed,” which means taxes have not been taken out of contributions prior to their deposit in a retirement account. When the account is finally paid out or withdrawn, taxes will need to be subtracted. Therefore, $50,000 sitting in a retirement account is not completely equal to $50,000 in cash.
Courts will make every effort to honor agreements the spouses are able to reach regarding their retirement benefits, provided the agreement is fair and willingly entered into by both spouses. Absent an agreement, the court overseeing your divorce will divide the benefits as fairly as possible, taking into account numerous factors of the marriage.
If you are considering divorce or have initiated divorce proceedings and are wondering how your retirement benefits will be affected, contact Attorney Shannon Dawes today by calling (614) 733-9999.