What to Do With Complicated Retirement Funds in an Oregon Divorce

Dividing Assets in an Oregon Divorce

The division of assets is one of the most commonly disputed issues in an Oregon divorce. However, the process can be especially challenging for couples with complicated retirement funds. Due to penalty and liquidity concerns, courts cannot divide up a retirement account as quickly as traditional bank accounts. Adding to the difficulties is that, for many divorcing couples, a retirement account is their most valuable asset.

Thus, in many cases, the assistance of an experienced Oregon family law attorney who is experienced in handling complicated retirement funds is necessary to develop a solution that protects your interests. At the law firm of Gearing, Rackner & McGrath, LLP, we have over 100 years of combined experience helping clients through the divorce process. Our dedicated divorce lawyers are skilled at coming up with workable solutions to even the most challenging issues.

How Do Courts Divide Retirement Funds?

In Oregon, courts use the equitable distribution doctrine to distribute a couple's property during a divorce. Despite the name, the doctrine of equitable distribution does not require the judge to divide assets equally between the spouses. Instead, the court considers the couple's overall situation and comes up with a solution that they believe is "equitable."

Judges rely on several presumptions when engaging in an equitable distribution analysis. One of the assumptions is that all assets obtained during a marriage result from both parties' efforts. This includes retirement accounts. On the other hand, assets that one spouse acquired before the marital union are more likely to be considered separate assets that are not subject to equitable distribution.

What Types of Retirement Accounts are Subject to Division During a Divorce?

Generally speaking, all retirement accounts may be divided between the spouses during a divorce. The focus is on who earned money from the account and did the account balance grow throughout the marriage. Some of the retirement accounts that may be subject to equitable division include:

  • 401(a)
  • 401(k)
  • 403(a) Qualified Annuity Plan
  • 403(b) Tax-sheltered Annuity Plan
  • 408(k) Simplified Employee Pension
  • 408(p) SIMPLE IRA
  • 457(b) Governmental Deferred Compensation Plan
  • Traditional IRA
  • 408A Roth IRA
  • 408(a) Traditional IRA

What Do Courts Consider When Dividing Retirement Accounts?

Unlike other states that rely on an equitable distribution framework, Oregon law does not provide judges with a specific list of factors. Thus, courts have broad discretion when conducting the equitable distribution analysis. For example, courts may consider the length of the marriage, each spouse's contributions to specific assets, and the total amount of assets subject to division. Additionally, Oregon courts must consider the direct and indirect contributions of a spouse as a homemaker.

Solutions for Dividing Complex Retirement Accounts

Retirement accounts often straddle the boundary between marital and separate assets. This is because it's common for a spouse to have contributed to their retirement account before the marriage and then continued to grow the account balance throughout the marriage.

Retirement accounts are unlike most other assets that fit neatly in one category. Of course, this can make dividing complex retirement accounts during a divorce quite challenging. However, there are a few ways Oregon divorce lawyers approach this problem.

Qualified Domestic Relations Order

Since retirement accounts impose strict guidelines on when funds can be withdrawn, a court's order to divide a retirement account often triggers a withdrawal that would incur taxes or an early-withdrawal penalty. The court can create a Qualified Domestic Relations Order (QDRO) to avoid these. A QDRO is a court order naming an alternate payee on a retirement account. This allows the non-account holder spouse to access their portion of the account. However, QDROs only apply to retirement accounts subject to the Employee Retirement Income Security Act of 1974 (ERISA).

Aside from asking the court to issue a QDRO, couples who need to divide the assets in a retirement account have other options, although they require some creativity. For example, one spouse could keep the entire balance of the retirement account and allow the other spouse to take other marital assets to offset the retirement account's value. Another option is for the couple to agree that, at a future date, the spouse whose name is on the retirement account will make distributions to the other spouse. Usually, this is done to avoid imposing taxes or penalties with an early withdrawal.

Speak with an Oregon Divorce Lawyer About Your Retirement Account Concerns Today

If you are filing for divorce, it is essential to think about the impact a divorce will have on your retirement accounts. At Gearing, Rackner & McGrath, LLP, our divorce lawyers have extensive experience handling Portland divorce cases and the related issues that frequently come up throughout the divorce process, including the division of complex retirement funds.

We provide custom-tailored legal advice and solutions for clients throughout Oregon and Southwest Washington, including in Multnomah County, Clackamas County, Washington County, Clatsop County, Columbia County, Yamhill County, Clark County, Cowlitz County, Skamania County, and Klickitat County.

To learn more about how our award-winning attorneys can assist you in a spousal support or modification order, call us at (503)-222-9116 or contact us through our online form to learn more about how we can help.