Retirement Plan Division in Florida Divorce

Division of martial property and assets accumulated during the course of the marriage is part of any divorce in Florida. Retirement accounts and pensions are also included in the division proceedings.

However, it is imperative to understand that the entire value of a specific retirement plan or pension won’t be subject to marital division. Instead, only the amount which was earned or accumulated during the course of the marriage is considered. Courts apply a variety of methods to determine the amount of retirement plan or pension which was earned throughout the marriage.

The following factors used by the courts to divide marital property include:

  • Duration of marriage
  • Each spouse’s overall economic circumstances
  • Each spouse’s debts and liabilities
  • Each spouse’s contributions to the marriage

Preparation of a Qualified Domestic Relations Order (QDRO) is required in order to divide retirement benefits. QDRO establishes an ex-spouse’s legal right to receive a specific percentage of a qualifying retirements plan’s balance or benefit payments and directs a retirement plan’s administrator to make the according payments. If the QDRO is prepared incorrectly or not prepared at all, there will be severe tax consequences.

The following are two types of retirement accounts:

  • Defined Benefit Plan (Pension) – This type of retirement count guarantees the account holder a specific sum of money upon retirement, which can be paid out either on a periodic basis or one lump sum.
  • Defined-Contribution Plan (401k) – Allows a person to save money for retirement in a tax-deferred account. Over time, the account holder (as well as the employer on some occasions) makes contributions to the plan.

Both types of retirement accounts are divided differently. With a defined benefit plan, the ex-spouse is able to receive a lump sum. With a defined-contribution plan, the account balance is typically multiplied by a percentage of vesting for the account upon being divided.