Introduction
When a couple decides to end their marriage in Wisconsin, the issue of property division takes center stage. The retirement benefits, particularly pension benefits, often stand out as one of the most substantial assets accumulated during a marriage. As such, divorcing couples frequently grapple with the question of whether they must divide their pension with their spouse.
Understanding Wisconsin Law
In Wisconsin, the concept of marital property holds significant importance. The state follows the marital property rule, which dictates that assets acquired during the course of a marriage are generally considered marital property. Consequently, pensions and other retirement benefits earned throughout the marriage fall under this category and are subject to equitable division during divorce proceedings.
Pensions can typically be classified into two main categories: defined benefit plans and defined contribution plans. While defined benefit plans determine retirement benefits based on factors like salary, length of service, and more, defined contribution plans involve a predetermined amount deposited into an employee’s account, such as a 401(k), often accompanied by a possible employer match.
Division of Defined Benefit Plans
In Wisconsin, the principle of equitable property division governs the division of defined benefit plans. This principle requires that marital assets be divided fairly, although not necessarily equally, between the parties involved. When dividing defined benefit plans, the court may order that the non-employee spouse receives either a percentage of the employee’s future retirement payments or a lump-sum payment equal to their rightful share.
As part of this division, the non-employee spouse is entitled to receive their share through a Qualified Domestic Relations Order (QDRO). This order specifies the non-employee spouse’s entitlement to a portion of the employee’s benefits and ensures that they receive their share directly from the pension plan administrator.
Division of Defined Contribution Plans
In contrast to the complexities surrounding defined benefit plans, dividing defined contribution plans like 401(k)s or IRAs tends to be more straightforward. In such cases, the court instructs the plan administrator to transfer a specific percentage of the account balance or a designated dollar amount to the non-employee spouse’s account. Subsequently, the non-employee spouse assumes control over the account.
Exceptions
While the division of pension plans is generally the norm during a Wisconsin divorce, several exceptions may excuse the non-employee spouse from receiving any portion of the employee’s pension plans. These exceptions include:
- The pension account was fully earned and vested before the couple’s marriage.
- The pension was inherited by one spouse from a parent or other relative.
- The pension was awarded as compensation for a personal injury.
- The couple has come to a mutual agreement excluding the pension from property division.
Conclusion
Dividing assets, especially pension benefits, is a complex process. It is crucial to seek the guidance of a professional divorce attorney to navigate the intricacies of the law. If you find yourself going through a divorce in Wisconsin and considering the division of pension benefits, obtaining legal advice is highly recommended. Additionally, considering the potential tax implications stemming from a pension split, especially with qualified plans, is vital. Addressing these tax and distribution matters will contribute to a more comprehensive and well-informed approach to property division.