Whether retirement is around the corner or decades away, one of the highest valued assets to negotiate during a divorce settlement is a pension or retirement plan from your 401K, IRA, or FERS (Federal Employees Retirement System) package. Pensions are also among the most complex assets to divide during the divorce process in California, where the state’s equal distribution of marital assets law applies to employee pensions.

It can be hard to see a spouse take half of a pension you’ve worked hard to contribute to over the years of your career, but according to state law, a pension is community property in a marriage and subject to division unless you take steps to protect your pension plan.

Retirement Benefits in California are Marital Property

According to California’s marital property law, the contract between spouses in a marriage forms a “community of two” and any assets they gain during their marriage belong to the community. When a spouse begins the divorce process in California, the couple has the option of negotiating their own mutually agreed upon 50/50 settlement for a judge to sign off on, or leaving it to the judge’s discretion to decide in a final divorce judgment.

All accounts opened or contributed to during a marriage, including 401K plans and other retirement pensions, belong to both parties in the marriage even if they are only under one spouse’s name. The idea is that even if only one spouse contributes to a retirement account, they are able to contribute partly due to the support of the spouse who shares the expenses and/or workload of keeping up the family home and care of children. Most pension plans are subject to division in a California divorce.

Can I Protect My Pension in a Divorce?

The best way to ensure your own pension or retirement plan isn’t subject to division in a divorce is to specify those terms in a prenuptial agreement signed by both parties before the marriage takes place. However, most people don’t anticipate their walk down the aisle will end in a divorce court, and only a small but growing percentage of marrying couples have prenuptial agreements. If you don’t have a prenuptial agreement protecting your pension, there are still ways you can protect this asset:

  • Negotiating alternatives: If you wish to keep your full pension in a divorce, you could consider negotiating for it by offering something of similar value in exchange. For instance, if your spouse wishes to keep the family home, you could agree to exchange the residence for your spouse’s half of your pension. You could also negotiate to keep your pension by agreeing to take on a greater percentage of the marital debt in exchange.
  • Agreeing to keep pensions separate: It’s important to remember that just as your spouse has a claim on half of your pension, you also have a claim to half of your spouse’s pension. If your spouse also has a retirement package, you and your spouse could mutually agree to settle with each keeping their own pensions intact without splitting either.
  • Taking your pension as a joint monthly annuity: if both spouses agree to this option instead of a lump-sum payout, your spouse continues to receive benefits after your death which could benefit them more than taking half of a lump sum during the divorce.

Ask Your Attorney About Negotiating to Keep Your Pension in a California Divorce

If it’s important to you to keep the pension you’ve worked hard to contribute to over your career, often mediation and negotiation between spouses with their attorneys present results in a mutually agreeable solution. Speak to your Los Angeles divorce attorney to learn about your rights and obligations under California divorce law, including negotiating a settlement that includes protecting your pension.