Retirement Assets and New Jersey Divorce 101

Pensions, 401Ks and any other qualified retirement assets are subject to equitable distribution in a New Jersey divorce.  Each spouse has a right to any retirement accounts accumulated from the date of marriage (or after when applicable) to the date of the filing if the Complaint for Divorce in the Family Part of the Superior Court of New Jersey.  In my practice as a family law attorney, the only time one spouse may retain “their” retirement asset is when we give the other spouse an asset that is equal in value during negotiations.  This can be a complex scenario as an asset that is available immediately (i.e., a bank account) is different than a retirement account, which cannot be liquidated absent penalties and taxes.  Sometimes an individual can take a loan from their pension, but then that person has a new monthly bill to pay. 

Finally it is essential that the issue of equitable distribution is settled before the Final Judgment of Divorce is entered.  Otherwise, you will likely loose all claims to this marital asset.  The recent case of Arce v. Agosto is an excellent example.  Let’s take a look.   

In the case, the parties were married in 1979 and divorced in 2005. Two children were born of the marriage. The parties executed a Property Settlement Agreement, which was incorporated into the dual judgment for divorce. Among other things, the settlement agreement addressed the equitable distribution of the parties’ pensions. Specifically, they agreed to divide the pensions equally, 50/50. The agreement stated that the equitable distribution of the pensions would be achieved by the following:

“Husband waives any and all interest in wife’s pension…in exchange, wife will receive 33$ of husband’s pension from the date of the marriage to the date of the filing of the complaint. This shall also include years purchased during the marriage. Wife’s interest shall be calculated based upon a Marx formula taking into account husband’s entitlement at time of retirement.”

In 2006 the parties signed a qualified domestic relations order (QDRO) confirming the wife’s right to receive 33% of the marital share of her ex-husband’s pension. The husband was a cop throughout the marriage, and was promoted to chief of police after the parties divorced. Since he was set to receive a pension through the Police and Fireman’s Retirement System, he was not going to be entitled to any social security upon retirement.

Because of this, the husband sought to reapportion the QDRO to reflect his lack of social security income. He argued that reapportioning the QDRO would be necessary because he would be solely dependent on his pension once he resigned. In June of 2013 though, the trial judge denied the husband’s request to reapportion the QDRO. The court found that he had no basis for requesting relief. However, the husband appealed.

On appeal, the husband argued that the trial court erred in denying his application to modify the QDRO. He alleged that the trial court failed to realize the impact that dividing his pension would have on him considering that would be his only source of income once he retired from the police force. Furthermore, the husband stated that failing to modify the QDRO was outright unfair and inequitable because his ex-wife would eventually receive income from her own pension, plus social security benefits.

Yet, the Appellate Division affirmed the findings of the lower court. The court stated that absent “unconscionability, fraud, or overreaching in negotiations of the settlement, a trial court has no legal or equitable basis to alter a matrimonial agreement.” The Appellate Division also stated that the case law the husband relied on to make his argument was inapplicable and clearly distinguishable. The reasoning for this was because the husband relied on cases where the parties did not execute settlement agreements, and therefore did not spell out how the pensions would be divided in the first place.

The moral of this story is that it is essential that you hire an attorney who handles only divorce and family law related matter.  If you or a loved on is facing a divorce, please do not ever hesitate to contact my law firm.  Thank you.