Throughout the United States, it is becoming increasingly more common for older couples to divorce. A gray divorce, or a divorce where the average age of the couple is over 50, focuses less on child custody and support, and more on retirement and asset division. While many married couples know they have retirement accounts, they may not necessarily know or understand what those accounts mean and how the retirement accounts will be divided during a Maryland divorce.
Common Retirement Plans in Montgomery County, Maryland and Prince George’s County, Maryland
Federal Employees Retirement System (FERS)
The Federal Employees Retirement System is a retirement plan available to Federal civilian employees that provides benefits from three different sources: A Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP). The employee must pay the Basic Benefit and Social Security portions of the FERS plan each pay period as a payroll deduction. After retirement, the employee will receive monthly annuity payments for the rest of the employee’s life.
401(k) Retirement Savings Plans
Named after section 401(k) of the Internal Revenue Code, a 401(k) is an employer-sponsored deferred-income retirement plan. To contribute to a 401(k), the employee designates a portion of each paycheck to be paid into the plan. Upon retirement, the employee can take distributions from the 401(k).
Individual Retirement Account (IRA)
An individual retirement account is an account set up, to allow an individual to make contributions to an account with a financial institution as a tax deduction at the time of the contribution. The contributions are than invested by a fund manager as a part of an investment portfolio. An IRA allows the participant to defer taxes on potential investment earnings, and may be created to bolster any employer sponsored retirement plans.
Most Maryland state employees are required to join the Maryland State Employee Pension System. Based on the employment date, most employees are vested in the pension system after either five or ten years. Depending on the plan, and creditable service, the employee will receive a portion of their earned benefits. For other state employees, there may be an optional or required alternative pension or retirement system. You should consult with your benefit handbook to know more about your specific plan. Each plan has specific requirements for distributions upon retirement as well as plan division in the event of a divorce.
Dividing Retirement Assets in a Montgomery County, Maryland or Prince George’s County Divorce
In Maryland, property is considered non-marital if the spouse owned the property prior to the marriage. Otherwise, all property acquired during the marriage, barring several exceptions, may be classified as marital property and may be subject to equitable division in the event of divorce. Under these guidelines, all contributions to a retirement account made while married may qualify as marital property and may be subject to equitable division. On the other hand, any contributions made to a retirement account that a spouse made prior to the marriage may be classified as separate non-marital property, and may be the exclusive property of the owning spouse. If the classification of the retirement asset is contested, the Court can be petitioned to make a determination regarding the asset.
Retirement assets that are considered marital property can only be divided by a special court order known as a Qualified Domestic Relations Order (QDRO). Once a QDRO is finalized by the court the non-employee spouse essentially steps into the shoes of the employee beneficiary and will have the same rights to the proceeds as the original owner.
Speak With a Divorce Attorney Experienced With Dividing Retirement in Maryland Divorces throughout Prince George’s County, Maryland and Montgomery County, Maryland
If you have other questions or concerns about the division of your retirement plan, and how the division of your retirement plan can potentially impact your Maryland divorce, please contact The Law Office of LaSheena M. Williams, LLC today. You can reach attorney LaSheena M. Williams at (301) 778-9950 or by leaving an online request for a consultation.
Our firm passionately represents clients across Rockville, Bethesda, Gaithersburg, Silver Spring, Takoma Park, Chevy Chase, College Park, Cheverly, Greenbelt, Oxon Hill, Hyattsville, Upper Marlboro, Largo, Bowie and surrounding communities.