In the absence of a premarital agreement, Arizona State Retirement System (ASRS) benefits earned during marriage are divisible community property. For example, if Husband participates in ASRS for 25 years, and if 15 of those 25 years are during Husband’s marriage to Wife, then in most cases 60% (representing 15 during-marriage years divided by 25 total years) of Husband’s ASRS pension benefit upon retirement will be treated as community property. Wife would receive half of the 60%, or 30% of the total monthly benefit. If Husband’s total benefit were $2,000 per month, Wife would receive $600 per month ($2,000 x .3).
The non-employee spouse can elect and pay for a survivor annuity, which will allow her benefits to continue if the employee spouse predeceases her. If the non-employee spouse predeceases the employee spouse, however, A.R.S. Sec. 38-773 provides that the non-employee spouse’s benefits will not be paid to the estate of the non-employee spouse. Instead, those benefits revert to the employee spouse. Under our example in the preceding paragraph, if Wife were receiving $600 per month and Husband were receiving $1,400 per month of Husband’s total $2,000 monthly ASRS benefit, and if Wife died before Husband, Wife’s $600 per month would revert to Husband so that Husband would then begin to receive the full benefit amount of $2,000 per month.
Division of retirement benefits in divorce is tricky business, particularly the division of pension benefits such as ASRS benefits. Specialized court orders called Domestic Relations Orders or Qualified Domestic Relations Orders (in the case of retirement plans qualified by the IRS) are required to divide these plans. Most divorce and family law attorneys do not prepare these DROs or QDROs. Instead, we refer this work to lawyers whose whole practice consists of preparing these orders and keeping up on the tax and other laws which affect them. As I assist clients in finalizing their divorces, including the division of retirement plans, I have several QDRO lawyers I work with to make sure all applicable retirement plans are divided fairly and accurately.
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