Just like the money in your bank account, pensions and retirement benefits are marital property. Because of that, even though your spouse did not work for the benefit, he or she is entitled to share in whatever benefits you amassed during the marriage. Generally, your spouse starts to become entitled to share in a portion of your retirement benefits on the date you say: “I do”. Your spouse’s interest in the retirement benefit stops accumulating on the date one of you files for divorce. Anything that has accrued between those two dates is subject to distribution by the court.
Generally, a person's pension benefit dies along with them. If you do not elect your spouse as a survivor, your death will result in your spouse losing the pension benefits they are entitled to receive from your retirement plan. In order to prevent that kind of loss, courts generally require you to select your former spouse as a survivor upon your pension benefit.
If you have already retired you will likely be unable to change a beneficiary designation upon your pension. In situations like that, courts are empowered to obligate the person to obtain life insurance for their spouse instead. This type of life insurance can be both costly for the pension holder and risky for the ex-spouse. For instance, someone who is collecting a pension is, likely, older, therefore subjecting them to higher insurance premiums. The person may also have higher insurance premiums, or even be uninsurable, if they have pre-existing health conditions. If that is the case, the ex-spouse will often have to find some other way to secure their ex's interest in their pension or go without a having a life insurance policy as security.
This can be a very confusing part of the law. Help yourself Turn Fear Into Power by scheduling a legal strategy session with us today.