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Is a pension at risk during a late-in-life divorce?

On Behalf of | Jun 1, 2023 | Divorce |

Married couples in Alabama generally combine households and bank accounts. They share income and credit cards, which makes dividing their finances challenging if/when they decide to divorce. The most valuable assets in a marital estate will typically be what spouses focus on the most.

For some families, the marital home is the top priority during divorce negotiations. For many others, financial assets are a major concern. A pension could be the primary source of income for someone’s golden years, which means they may understandably worry about any reduction in their pension benefits.

Pensions are often treated as marital property

People find divorce claims related to pensions and other retirement assets confusing in part because they may be benefits related to their employment. It is typical for people to hold their pension benefits in an employer-sponsored account and for the funds to be only in the name of the employee, not the name of their spouse.

However, for the purpose of property division during an Alabama divorce, it isn’t the name on the account that matters the most. Instead, the courts care about when someone made contributions to the account or earned certain assets. Part of the pension could be separate property, and part of it may be marital property that someone has to divide.

Even if it is possible to negotiate a settlement where spouses don’t split the actual pension funds, the value of the pension benefits added during the marriage will typically influence how they divide other assets in the divorce. When considering the pension in the context of the other marital resources, the solution for handling all of the marital property should be fair.

Those who feel particularly concerned about or protective of their pension benefits may want to consider negotiating a settlement with their spouse, as someone could potentially avoid sharing their pension if they make concessions concerning other assets from the marital estate. Identifying the resources that matter the most to someone during the property division process can make it easier to implement a successful strategy for controlling the economic impact of that process.