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Pension Evaluation
Basic Pension Principles
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Community Property
Dividing Marital or Community Property
Divorce & Retirement FAQs
Equitable Distribution
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Pension and Divorce FAQs

How is property divided at divorce?

It is common for a divorcing couple to decide about dividing their property and debts themselves, rather than leave it to the judge. But if a couple cannot agree, they can submit their property dispute to the court, which will use state law to divide the property.

Division of property does not necessarily mean a physical division. Rather, the court awards each spouse a percentage of the total value of the property. (It is illegal for either spouse to hide assets in order to shield them from property division.) Each spouse gets items whose worth adds up to his or her percentage.

Courts divide property under one of two schemes: equitable distribution or community property.

  • Equitable distribution. Assets and earnings accumulated during marriage are divided equitably (fairly). In practice, often two-thirds of the assets go to the higher wage earner and one-third to the other spouse. Equitable distribution principles are followed everywhere except the community property states listed just below.
  • Community property. In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, all property of a married person is classified as either community property, owned equally by both spouses, or the separate property of one spouse. At divorce, community property is generally divided equally between the spouses, while each spouse keeps his or her separate property.

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How do we distinguish between community and non-community property?

Very generally, here are the rules for determining what's community property and what isn't:

  • Community property includes all earnings during marriage and everything acquired with those earnings. All debts incurred during marriage, unless the creditor was specifically looking to the separate property of one spouse for payment, are community property debts.
  • Separate property of one spouse includes gifts and inheritances given just to that spouse, personal injury awards received by that spouse, and the proceeds of a pension that vested (that is, the pensioner became legally entitled to receive it) before marriage. Property purchased with the separate funds of a spouse remain that spouse's separate property. A business owned by one spouse before the marriage remains his or her separate property during the marriage, although a portion of it may be considered community property if the business increased in value during the marriage or both spouses worked at it.
  • Property purchased with a combination of separate and community funds is part community and part separate property, so long as a spouse is able to show that some separate funds were used. Separate property mixed together with community property generally becomes community property.

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What is "equitable distribution"?

That means a court divides marital property as it thinks is fair. States applying principles of equitable distribution also view marriage as a shared enterprise in which both spouses usually contribute significantly to the acquisition and preservation of property. The division of property could be fifty-fifty, sixty-forty, seventy-thirty, or even all for one spouse and nothing for the other (although that would be very unusual). Under equitable distribution, courts consider a variety of factors and need not weigh the factors equally. That permits more flexibility and more attention to the financial situation of both spouses after the divorce. However, it also makes the resolution of property issues less predictable. Here are some examples of factors that are considered by states applying principles of equitable distribution.

  1. Nonmarital property. If one spouse has much more nonmarital property than the other, that could be a basis for giving more marital property to the less wealthy spouse.
  2. Earning power. If one spouse has more earning power than the other, that could be a basis for giving more marital property to the spouse with less earning power.
  3. Who earned the property. That can be a factor favoring the party who worked hard to acquire or maintain the property.
  4. Services as a homemaker. Courts recognize that keeping a home and raising children are work. In addition, those services often enable the spouse who is working outside the home to earn more money. Thus, services as a homemaker are a factor in favor of the homemaker. Some courts also apply a related concept of considering whether one spouse had impaired her or his earning capacity because of working as a homemaker. That factor also would favor the homemaker-spouse.
  5. Waste and dissipation. If a spouse wasted money during the marriage, that could count against him or her when it comes time to divide property. This factor is sometimes labeled "economic fault," and may be considered even by courts that do not consider other kinds of fault.
  6. Fault. Non-economic fault, such as spousal abuse or marital infidelity, is considered in some states, but many states do not consider it relevant to property division.
  7. Duration of marriage. A longer marriage may be a factor in favor of a larger property award to the spouse with less wealth or earning power.
  8. Age and health of parties. If one spouse has ill health or is significantly older than the other, that factor could favor a larger award to the sicker or older spouse.

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How do judges decide disputed property issues?

Laws vary from state to state. As a starting point, many states allow parties to keep their "nonmarital" or "separate" property. Nonmarital property includes property that a spouse brought into the marriage and kept in his or her own name during the marriage. It also includes inheritances received and kept separate during the marriage. It also may include gifts received by just one spouse during the marriage. Some states permit division of separate as well as marital property when parties divorce, but the origin of the property is considered when deciding who receives the property. After allocating separate property, the court divides marital or community property.

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