Divorce & Retirement Funds: The Basics

Dividing retirement accounts can be one of the trickier issues in a divorce and it is important to have a qualified lawyer at hand to help you through all of the complex problems that can arise. Below are some basic rules to keep in mind when discussing your case with your attorney.

I. The 10-year rule

In Alabama, a court cannot order any retirement account to be divided if the parties were not “married for a period of ten years during which the retirement was being accumulated”. Unfortunately, if your marriage has lasted less than 10 years, then you are not legally entitled to receive any share of your spouse’s retirement account. Additionally, if you have been married 10 years, it is also necessary that your spouse was contributing to his or her retirement account for that period of time. The 10-year clock starts on the date of marriage (no matter how long you and your spouse dated prior to that) and ends on the date of filing of divorce NOT the date of the final order.

II. Contributions prior to marriage

In an order awarding a spouse retirement funds, the court cannot include any portion of retirement benefits contributed and interest accrued prior to the date of marriage. However, it will be the burden of the account holder to prove what contributions and interest were generated prior to the marriage, so be sure to provide a full account history to your attorney. But, take caution that this rule only applies to retirement accounts. Should any other type of property acquired before the marriage (real estate, investment account, dividends, etc.) be commingled with marital property or property acquired after the marriage, the court can take the value of the previously owned property into account when deciding whether to award an allowance to either spouse.

III. Alimony exception to 10-year rule

Despite a court’s inability to award retirement benefits to a spouse in a marriage lasting less than 10 years or where there has not been 10 years of contributions to retirement during a marriage of any length, the court can still consider the value of the retirement account when determining whether to award alimony. For example, if a husband files for divorce in the 9th year of marriage, his wife cannot ask for a division of the husband’s retirement account. But, she can ask for alimony and request that the court look at the large amounts of money put into the husband’s retirement account throughout the marriage to decide if alimony should be awarded and to what extent.

IV. Other considerations

A court cannot award more than 50% of a retirement account to another spouse. Even if the parties agree for more than 50% to be divided, the account holder (Fidelity, Charles Schwab, Boeing, etc.) may not honor the order because it violates the Alabama Code.

Most account holders have templates for how they want the orders that divide the retirement accounts to look. Have your lawyer contact the account holder to get a copy of those templates before drafting any proposed order or before presenting your case in trial to a judge. Without this important preparation, there is a risk that any order will be invalid and the process will need to be repeated, costing you time and money.

If you or a loved one are facing a situation like this, it is important to consult with an experienced divorce attorney. Our attorneys are here to guide you through this process, answering your questions every step along the way. Give our office a call at 256-533-1667 or click here to schedule a time to talk with us.