Dividing Retirement Accounts in an Oregon Divorce

July 23rd, 2024
Posted By
Sarah M. Litowich
stacks of coins and hand putting a coin in a jar marked
One of the most emotional — and legally complex — issues in an Oregon divorce concerns the division of retirement accounts. Whether you’re divorcing after retirement or before, these assets are subject to division if they were acquired during the course of the marriage. However, the process for dividing retirement accounts will depend on the type of plan and whether spouses are able to reach a settlement agreement outside of court.

What is a Retirement Account?

A retirement account is an investment vehicle that helps people save for retirement by growing their money until they have reached the age of retirement. They typically have tax benefits. There are many different types of retirement accounts in Oregon, including the following:
  • 401(k)s — 401(k)s are employer-sponsored retirement plans that come with tax advantages. Each month, a portion of the employee’s paycheck goes into the account where it is invested and can grow over time.
  • Individual Retirement Accounts (IRAs) — IRAs are retirement plans that are set up with a financial institution. They allow an employee to contribute funds toward retirement on a tax-free and tax-deferred basis.
  • Pensions — A pension plan is a retirement plan that requires an employer to contribute to a pool of funds that are set aside for the future benefit of the employee.
  • 403(b)s — A 403(b) plan is an employer-sponsored retirement plan that offers tax benefits to the employees of certain organizations, such as non-profits, churches, and tax-exempt charitable entities.
  • Roth IRAs — A Roth IRA is a type of individual retirement account that is funded with after-tax dollars.
In addition, people may also have retirement benefits through the federal or state governments based on their employment. Other types of retirement assets in divorce may include employee stock options and life insurance accounts. Social Security benefits are not considered

Are Retirement Accounts Marital Property?

In an Oregon divorce, retirement accounts are designated as either separate or marital property. While separate property may remain with the spouse who originally owned it, marital property must be divided in divorce. Oregon follows the doctrine of equitable distribution — this means that marital assets are not necessarily divided equally, but in a way that is deemed fair to both spouses.

How are Retirement Benefits Divided in Divorce?

Retirement benefits that constitute marital property can be divided in an Oregon divorce in two different ways — they may be distributed between spouses by court order or the spouses can enter into a settlement agreement. Alternative dispute resolution, such as mediation or the collaborative process, can help spouses reach a creative resolution when it comes to dividing their retirement assets. For instance, spouses can also consider trading other assets of comparable value, rather than their retirement funds. If spouses cannot reach a settlement, a court will decide how retirement assets in divorce should be divided. A judge has broad discretion when evaluating what would be an equitable outcome. A court may take into consideration a number of factors, including the length of the marriage, each spouse’s individual contributions to specific assets, and the total amount of assets to be divided in the divorce. Notably, if a legally valid prenuptial or postnuptial agreement was entered into between the spouses, it would likely address how marital property — including retirement assets — should be divided. These agreements can help to streamline the divorce process, reduce the potential for lengthy litigation, and save a considerable amount of money by deciding these issues in advance.

When is a QDRO Needed to Divide Retirement Assets in Divorce?

“Qualified” plans must be divided using a Qualified Domestic Relations Order — commonly referred to as a “QDRO.” This document informs the administrator of the retirement plan that they must distribute a portion of the plan to the non-employee spouse. QDROs are typically drafted as part of a divorce settlement or with the final divorce trial entry. It must contain specific information, including the names of the spouses, their mailing addresses, the amount each spouse will receive, the time period that applies to the QDRO, and which retirement plan it applies to. Importantly, QDROs cannot divide certain retirement plans, such as those administered through the federal or state government.

Contact an Experienced Oregon Divorce Attorney

If retirement assets are at issue in your divorce, it’s crucial to have a skillful divorce attorney by your side who can advise you regarding your options and protect your financial interests. Based in Salem, Litowich Law offers clients throughout Oregon compassionate counsel and reliable representation for divorce and property division matters. We welcome you to contact us to schedule a consultation.
Categories: Divorce