What happens to retirement plans in a divorce?

When couples in Tennessee decide to end their marriage, one of the first questions they ask is what happens to our retirement plan (or plans, if both spouses have one)? As with all questions of property division, the parties themselves can resolve the question by entering into an antenuptial agreement before they marry or a marital termination agreement after they decide to divorce. Nevertheless, knowing something about the provisions of Tennessee law regarding the division of retirement accounts in the absence of a spousal agreement can assist a party in negotiating either of these agreements.

All of the property a couple owns is either “marital property” or “separate property.” Marital property includes all property acquired by the couple during the marriage. Separate property comprises all property acquired by a spouse before the marriage and certain gifts and bequests. Retirement plans can be both: funds paid into a plan prior to the marriage are considered separate property, and funds paid into the plan, including interest and dividends, are considered marital property.

Generally speaking, each spouse is allowed to keep his or her separate property, including retirement plan benefits. Marital property is divided on an equitable basis. In making this equitable division, the court is required to consider the length of the marriage, the age, physical and mental health and relative earning capacity of each spouse. After considering all of these factors, the court must award marital assets, including accumulated pension fund benefits, in shares that it deems to be fair to both parties. This formula is obviously vague, and its application cannot always be predicted in advance.

A person who is contemplating a divorce and who has accumulated a substantial balance in a retirement plan, or whose spouse has such a plan, may benefit from consulting an experienced divorce lawyer for advice on how a court is likely to distribute marital property, including retirement plan benefits. Such a consultation can provide useful guidance on negotiating a fair division plan benefits and other marital property.