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There are some retirement benefits that are not community property and some retirements that are community property, meaning that they would have to be divided equitably in a divorce that takes place in a community property state. The retirement benefits that are not community property include:
If you have any of these, they do not have to be divided or shared with your ex-spouse. However, that does not mean that they can't be shared.
Community Property Retirement Benefits
The retirement benefits that are classified as community property are:
Two Ways to Divide a Retirement Benefit
In a community property state, an ex-spouse is legally entitled to her or his share of these benefits. There are two ways that the division of the retirement benefits could be settled: (1) by a present-day valuation buy-out, and (2) by division into two accounts. With the buy-out, the spouse takes the present-day value of her or his interest in the benefit, as cash or something else of value. The second way, the division into two accounts, preserves the spouse's interest. This may be a good option when the benefit is a pension plan or stock option that may grow in value over the coming years.
Tax Consequences
There are different tax advantages to each option, from each spouse's perspective. Therefore, it's a good idea to consult a divorce attorney who understands the tax consequences of retirement benefit options in a divorce. Contact an experienced divorce lawyer near you today for more information about your specific situation.
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