If I Have More Money in my 401k Account Than my Spouse Must We Equalize It in a California Divorce?

I am often asked questions about retirement account division in California divorces. Here’s an example:

“We are getting a divorce. I have $20,000 more than my husband in my 401k. Should we do a qualified domestic relations order (QDRO) or should I make an equalizing payment?”

Answer:

It would be simpler to just pay him his community property share. Keep in mind that you are paying him with tax-free money whereas the QDRO would transfer tax-deferred money but obtaining a QDRO costs between $800.00 and $1500.00 so it might cost more to use a QDRO than you save by transferring tax deferred money from your 401k to an IRA for him.

Also, you don’t mention when you started the 401k. It’s important because your ex is only entitled to half the community property interest of both your respective retirement accounts (as are you—community property and community debt is split evenly in a divorce in California).

f you began a retirement account before marriage, then your spouse is entitled to one half of the contributions and the services credits you accrued or purchased during the marriage, so you spouse would not receive 50 percent of your retirement benefits. These statements are true no matter what type of retirement accounts you have including 401ks, IRAs, Roth IRAs, private pensions, public pensions like CalPERS and military pensions.

Remember, the court will accept any reasonable division of community property and community debt on which the parties agree. The 401k is not your only asset. The issue should be discussed in the context of the division of the entire community property estate.

For more information on what happens to your retirement accounts when you get a divorce in California read this post.

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