For divorcing couples who have been married for a significant number of years the retirement plans owned by them may be the largest assets they own, worth more than even the house. Because California is a community property state, the process of dividing the assets in these plans can be very complex and involves provisions of both state and federal laws.

If the assets in each retirement plan are roughly equal, dividing the plans can be relatively simple: each spouse keeps his or her plan, and any significant difference can be removed by a cash payment or the transfer of another asset. But, what happens if only one spouse has a retirement plan or if the accumulated assets in the plans owned by each spouse are substantially unequal?

The first step in such cases is determining how much value each plan accumulated during the marriage. This amount becomes community property and must be divided equally between the spouses. Determining the amount of community property that is represented by plan assets may require the assistance of accountants, actuaries or other professionals experienced in fixing such values. If the parties cannot agree on how to divide plan assets, the court will enter an order that fixes the division.

Because the pension plan is a contract that requires the plan trustee to make specified payments to a designated party, the court must often issue what is called a Qualified Domestic Relations Order, or “QDRO.” QDROs can be very complicated documents, and most persons knowledgeable in the field suggest using legal counsel to prepare the document. Also, the plan trustee must accept the QDRO and agree to make payments to the designated party, usually called an “alternate payee.” Federal law imposes other requirements before a QDRO becomes an enforceable agreement or judgment.

Anyone facing the issue of property division that includes a significant amount of retirement plan assets may wish to consult an experienced family lawyer for advice on what amount of plan assets may be subject to California’s community property laws and help in drafting a QDRO.