How Are Retirement Accounts Divided in An Arizona Divorce?
Division of Retirement Accounts in an Arizona Divorce
The Arizona Supreme Court in the Van Loan v. Van Loan case had to answer the question whether an unvested pension constituted community property in Arizona. The court concluded that retirement assets, including pensions, are treated in the same manner as all other community property in Arizona and are, therefore, divided between the spouses in a divorce. The court will apportion the community property interest in retirement accounts between the spouses and will award each spouse his or her separate property portion of those retirement accounts.
There are several ways to determine the community and separate property interests in a retirement account. The approach used depends on the type of retirement account to be divided. Retirement accounts are either a “defined contribution” plan or a “defined benefit” plan. A defined contribution retirement plan is a plan where you invest money that grows over time, like an IRA or 401(k). You are only entitled to the value of the account. A defined benefit plan is a plan where you may or may not invest money into the plan and you will receive a monthly amount at a certain age, like a pension. You may or may not be entitled to the value of the account in lieu of or in addition to monthly pension payments; depending upon the plan.
The Arizona Supreme Court in the Johnson v. Johnson case presented an excellent analysis of the ways the court may determine the community and separate property interests in these types of retirement accounts.
The actual division of the accounts occurs by rolling out an amount into a separate account for the spouse receiving an interest in the retirement account. Alternatively, you can offset that spouse’s interest in the other spouse’s retirement account by awarding him or her more of some other asset. If you are splitting a retirement account, you will need to prepare a special Order referred to as a Qualified Domestic Relations Order, which is an Order that directs the plan administrator as to how to divide the community property portion of the retirement account.
Division of Military Retirement in Arizona
Military Retirement Pay may also be divided in an Arizona divorce. However, special circumstances exist in certain cases of military benefits, such as Combat-Related Special Compensation payments and other forms of military disability payments that may not be divided in an Arizona divorce. However, the Arizona Supreme Court in the unpublished Merrill v. Merrill case held that a trial court might order a spouse to compensate his or her spouse if the court previously awarded the division of Military Retirement Pay that is subsequently turned into Combat-Related Special Compensation pay due to the subsequent disability of the military spouse. Since Merrill is an unpublished case, you are not permitted in almost all cases to cite the case as authority to the court.
Contact Our Scottsdale Arizona Community Property Attorneys
Call us at (480)305-8300 to schedule a consultation with one of our Scottsdale and Phoenix Arizona Community Property Attorneys regarding Arizona community property laws or any other Arizona family law matter.