Deciding who gets the house and how the debts are divided aren't the only property issues faced by divorcing couples. Under New York law, retirement plans are also deemed marital property, and these plans are subject to equitable distribution among spouses.
Couples spend a lot of time planning and saving for their golden years, but should those relationships end, savings and funds each spouse was counting on for retirement must be divided in a way that is fair. Qualified divorce attorneys can help high-net worth individuals find retirement assets their spouses may be hiding and ensure that their clients get a fair share of these funds.
THE MAJAUSKAS FORMULA
New York divorce law often follows a formula known as the Majauskas formula to determine how to divide retirement plans. The Majauskas formula was established by the New York Court of Appeal in the landmark case Majauskas v. Majauskas. The formula is applied to all retirement assets, including 401(k)s, IRAs, 403(b)s, pensions, and profit-sharing plans.
Judges using the Majauskas formula multiply the actual accrued benefit by a fraction. The numerator of this fraction is the number of months of the marriage while the retirement plan holder was accruing benefits, and the denominator is the number of months of employment with pension credit at the time of the plan holder's retirement. This result is then multiplied by a percentage. For lengthy marriages, this percentage is usually around 50 percent, while the courts will apply a lower percentage to shorter marriages.
Example: a husband collects retirement benefit at $2,000 per month. He accrued benefits over 30 years (360 months) and was married for 15 years (180 months) while accruing benefits. Applying the formula, the wife would get 50 percent of 180/360 of the monthly pension benefit, which would come out to 25 percent, or $500 per month.
The Majauskas formula isn't the only way courts can divide retirement benefits. Negotiated settlements between divorcing spouses are also quite common, especially in cases where both spouses have their own retirement plans.
To obtain an equitable division of retirement assets by the court, a spouse must obtain a Qualified Domestic Relations Order, or QDRO. The QDRO is necessary to get the ball rolling with regard to a division of retirement benefits. The QDRO directs pension administrators to split a pension as ordered by the court.
Obtaining a QDRO as soon as possible is important, as circumstances such as the other spouse retiring, dying, or withdrawing funds makes seeking retirement benefits retroactively from a divorced spouse difficult.
Divorce for couples nearing retirement age can be daunting, especially for those who are concerned about their financial future, or for a spouse worried their partner could be hiding retirement assets. Qualified divorce attorneys with experience in retirement asset division cases can help ensure these spouses obtain the benefits they're entitled to receiving.
MONTEFUSCO | PAMMER helps their clients protect their assets in a high net worth divorce. An established Suffolk County & Nassau County law firm, MONTEFUSCO | PAMMER has experience in handling a pension for divorce purposes and helping spouses obtain their fair share.