Dividing a Pension

During a divorce, the spouses will have to split their assets and debts that were accumulated through the years.  Minnesota is an equitable distribution state, which means that the marital assets and debts will be equitably distributed.  The court will examine a list of factors in deciding who will receive how much of each asset.  One of the biggest assets for many couples is retirement accounts.  People use a variety of strategies to plan for their future, including assets such as 401(k)s, IRAs, stocks, or simply investing in real estate.  In some cases, one or both spouses may have pensions through their employment.

mason jar with the word pension written on it and coins inside

Pensions acquired during marriage are marital assets subject to division in the divorce.  This is true even though only one spouse’s name is on the pension account and also even though it was earned by virtue of work done by only one of the spouses.  Pensions may be held in administered in a variety of ways.  Unlike a simple savings account, however, determining the value of a pension cannot be done by simply examining a statement.  Most pensions will start paying out a certain amount to the worker once he or she reaches a certain age and will continuing paying until the worker dies.  The amount to be paid out each month will be determined by how many years the worker served at the business, the average income of the worker during service, and the age when the worker starts collecting.  The problem with pensions and divorce is that the value of the pension grows over time, depending on the rate of return.  The exact value at the time of divorce can be challenging to determine, as the spouse entitled to the pension payments is not actually entitled to any payments at the time of divorce unless it is time for retirement.

The Minnesota Supreme Court in Janssen v. Janssen, 331 N.W.2d at 752 (Minn. 1983) address the problem of dividing pensions accurately.  The case developed a formula to divide future pension benefits in a divorce, even when the receiving spouse was not receiving those monthly benefits at the time the parties’ marriage is dissolved.  The formula takes into account that the marital interest of the pension is only a fraction of what the spouse will eventually get paid when the pension benefits start to come in.

We have extensive experience in helping our clients understand the division of assets, including pensions.  Contact us today at (651) 371-9117 to talk about your divorce and your retirement.