A pension is often a principal asset of a marriage relationship. Over time, a spouse, or their employer, contributes to an employee pension plan for the benefit that spouse when it comes time to retire.
Because Minnesota is a “community property state”, the spouse’s pension plan is also the property of his/her/their spouse. See Minn. Stat. §518.003 subd. 3b. Because the pension is part of the marital estate, it falls under the authority of the courts to decide whether and how to divide that interest between spouses at the time of divorce. See Minn. Stat. §518.58 subd. 1.
The Challenge of Dividing a Future Interest
Because a pension is basically an expectation to receive payment in the future, it’s unique in that its value cannot be determined like, say, a bank account or a house.
The law gives Minnesota courts some different ‘tools’ to value and divide a future asset:
it can appoint an expert, an ‘actuary’ to determine a ‘present value’ of future payments, by discounting future payments to a present amount which could be invested to receive the future sum.
Court will use the ‘present value’ method if a marital estate also includes non-pension property of similar value, which the court can then divide along with the pension.
So, if Spouse A has a pension with a present value of $100,000, and together, Spouse A and Spouse B own a house worth $100,000, it can be pretty simple to divide the marital estate by awarding Spouse A the pension, and Spouse B the house.
But note; the Minnesota Supreme Court in its 1983 decision Taylor v Taylor, 329 NW2d 795 (Minn. 1983) declared this kind of property division unfair; as it leaves one spouse homeless and one spouse without a retirement!
So, in some cases the court will instead, award a ‘fixed percentage’ of the future pension payments, to the non-pension spouse; payable when the pension spouse starts to receive payments.
Under the ‘fixed percentage’ method, the pension is divided in the future, when it goes into payout status.
And finally, when there’s uncertainty about the value of a pension and the future payments that go with it, a court can create a Qualified Domestic Relations Order (‘QDRO’). Federal law allows for pension rights to be assigned in accordance a valid order issued by a state court in a domestic relations matter. See 29 USC 1056(d)(3)(A); that includes a divorce. This means that under a QDRO, the non-pension spouse becomes eligible to receive their share of the pension during their lifetime. Minnesota judges have discretion to issue a QDRO; though they are not required to. See Fastner v. Fastner, 427 NW2d 691 (Minn. 1988).
So when it comes to a pension, and how to divide future payments in a divorce, know that you can ask the court to use one of several different ‘tools’ to have that pension divided fairly and equitably!
Meet Tim Simonson
Tim has been practicing for more than twenty (20) years now, He's handled divorce, child support, child custody, third party and grandparent rights, domestic abuse, parenting time, and many other areas of family law. He always enjoys the chance to meet people and see whether he can help find solutions to their legal problems.
Contact Beyer & Simonson
If you are facing divorce and any of the divorce-related issues such as spousal maintenance, child support, child custody, property division, or domestic abuse matters, you need our experienced Minneapolis divorce attorneys to help you. Contact Beyer & Simonson in Edina, Minnesota today at (952) 303-6007.
