If you are considering divorce, and you are retired or near retirement, you may wonder: Can my ex-spouse claim my retirement benefits?
The short answer is: Yes.
In Oklahoma, courts consider any property that a spouse acquired during marriage to be marital property. If property is marital, courts divide the property equitably between the spouses. In Carpenter v. Carpenter, the Oklahoma Supreme Court held that, if a spouse worked during the marriage, the working spouse's pension benefits are marital property, and a court should divide the spouse’s pension or retirement benefits between the spouses.
How do courts divide pension benefits?
There are two ways that courts divide pension benefits:
1. The present value method.
Under the present value method, the court will attempt to ascertain the value of the retired/retiring spouse’s pension. The court will then order the spouse who will earn the pension to pay a certain amount of money to the other spouse, in order to offset the gain that the retired/retiring spouse receives.
2. The deferred distribution method.
Under the deferred distribution method, the court will enter what is called a qualified domestic relations order (QDRO). A QDRO says that the pension plan administrator is to divide the pension, and pay a certain portion of the pension to one spouse, and pay the remaining portion of the pension to the other spouse. Thus, the working spouse, upon retirement, will only receive a certain portion of his/her retirement benefits. The other spouse will get the rest.
The attorneys will then send the QDRO to the plan administrator. Because the plan administrator is not a party to the case, the court can’t actually order the plan administrator to divide the pension. So, the plan administrator will examine the QDRO, and, if the QDRO meets with the administrator’s approval, the administrator will then divide the pension.
Because of this, you need to make sure that your QDRO is drafted so that it meets with the plan administrator’s specifications. Different plan administrators have different ideas of how they think a QDRO should be drafted. If your plan administrator thinks your QDRO is drafted improperly, the administrator will reject the QDRO, and the judge can’t force him to accept it. The Hernsberger Law Firm (a Texas firm that specializes in drafting QDROs) estimates that there are “tens of thousands” of defective QDROs in Texas alone.
So, you will need an attorney who is experienced in drafting QDROs. Many family law attorneys (myself included) do not draft QDROs ourselves. Instead, we outsource all our QDRO drafting to QDRO specialists.
Which is best: The present value method or the deferred distribution method?
This depends on whom you ask. In Pulliam v. Pulliam, the Oklahoma Supreme Court wrote, “We hold that the present value method is preferable where pension valuation is not unduly speculative, and where, at the time of divorce, sufficient assets are available to divide the present value of retirement benefits without causing an undue hardship to the employee.” Because this is the law in Oklahoma, Oklahoma courts prefer to use the present value method.
In Pulliam, the Oklahoma Supreme Court noted that most other states also prefer the present value method; however, the Court also observed that a minority of states prefer the deferred distribution method.
If you settle your divorce case out of court (and most divorce cases are settled out of court) then you and your ex-spouse may agree on whether to use the present value method or the deferred distribution method. If you agree to use the deferred distribution method, the judge will likely approve of your agreement, even though courts prefer the present value method. If you are unsure about which method of dividing pension assets is best for you, consult your attorney.
Can my ex-wife (or ex-husband) claim my pension years after divorce?
This depends on whether, at the time the court entered the divorce decree, the court ordered a division of pension benefits. A court could, in a divorce decree, order that, when you retire, you must pay your spouse a share of your pension benefits. The court’s order would be binding, even several years later.
However, if the court did not order a division of benefits in its divorce decree, then, the court may not change its order later on, and order a distribution of pension benefits. Oklahoma law says, “Payments pertaining to a division of property are irrevocable and not subject to subsequent modification by the court making the award.”
The only situation, in which a court conceivably could change its order, and order a distribution of pension benefits later on, is if one spouse agreed to a divorce decree that did not divide pension benefits, and then the spouse proved that the opposing party used fraud or duress to induce him/her to agree to the decree. In that case, the aggrieved spouse could ask a judge to set aside the decree based on fraud or duress.
Protect your assets: Obtain a competent attorney
The issue of dividing pensions after divorce is highly complex. You don’t want to be “taken to the cleaners” in a divorce case. If you need assistance in obtaining a divorce settlement that protects your pension, the Persaud Law Office is willing to assist you. Contact us today.