A divorce can be a difficult time for everyone involved, especially when it comes to dividing assets and property. If one spouse has a pension, it can add an additional layer of complexity to the process. In North Carolina, pension plans are considered marital property subject to division during a divorce. Here’s what you need to know about how property is divided if one spouse has a pension in North Carolina.
Equitable Distribution in North Carolina
North Carolina is an "equitable distribution" state, which means that all of the marital property is divided in a way that is fair and just, but not necessarily equal. Marital property is any property acquired during the marriage, including pensions, retirement accounts, and other benefits.
Valuing the Pension
In North Carolina, a pension is divided based on the present value of the plan at the time of separation or divorce. The present value is determined by the amount of money that would be needed to provide the non-employee spouse with the same benefits as the employee spouse. This value is typically determined by an expert, such as a financial planner or actuary, who uses specific calculations to determine the value of the pension.
Direct Payment or Offsetting Assets
Once the present value of the pension is determined, there are two ways to divide it: direct payment or offsetting assets.
In some cases, the non-employee spouse may be entitled to a portion of the pension payments directly. This is known as a "qualified domestic relations order," or QDRO. The QDRO allows the non-employee spouse to receive a portion of the pension payments as they are made to the employee spouse.
In other cases, the non-employee spouse may receive an asset of equal value to the present value of the pension, such as another retirement account or real estate. This is known as offsetting assets.
Tax Implications
It’s important to note that dividing a pension can have tax implications for both parties. The employee spouse may be required to pay taxes on the portion of the pension that is given to the non-employee spouse, and the non-employee spouse may also be required to pay taxes on the amount they receive. It’s important to work with a qualified financial professional, such as a CPA or tax attorney, to fully understand the tax implications of dividing a pension.
Conclusion
Dividing property during a divorce, especially when a pension is involved, can be complicated. In North Carolina, pensions are considered marital property subject to division. The present value of the pension is determined by an expert and can be divided through direct payment or offsetting assets. It’s important to work with a qualified financial professional to fully understand the implications of dividing a pension and to ensure that the division is fair and just for both parties.