Connecticut is referred to as an “all-property equitable distribution” state. Pursuant to Connecticut statutes, the court will consider several factors in determining a fair, but not necessarily equal, division of all assets, earnings and debts.
The division of some assets are relatively straightforward, but the division of pensions and retirement benefits present certain complications. For example, some retirement benefits may not have vested at the time of the divorce, meaning the holding spouse does not yet have a complete and present right to that asset. Also, invading a retirement asset too early may result in unfavorable tax consequences.
In Connecticut, there are three approved methods of valuing and distributing pension and retirement accounts, although these methods are not exclusive:
- The present value or offset method: A present value is placed on the retirement plan as of the date of the marriage dissolution by using actuarial tables to determine the life expectancy of the employee-spouse and evaluating the probability that the employee-spouse will eventually exercise their rights under the plan. This method has the advantage of creating a clean break between the parties. However, it also places the entire risk of forfeiture before maturity on the employee-spouse. Moreover, this method is not workable when there are insufficient other assets by which to offset the value of the pension.
- The present division method: This delays distribution until the pension matures. The judge determines the percentage share of the pension benefits to which the nonemployee-spouse is entitled. The judge can use a Qualified Domestic Relations Order or some equivalent to divide the benefits between the spouses. The advantage of this approach is that it imposes on both spouses equally the risk of forfeiture, and it is favored when there are insufficient assets to offset the award of the pension to the employee-spouse alone or when evidence is inadequate to establish the present value. However, the disadvantage is that it prolongs the spouses’ entanglement with each other.
- Reserved jurisdiction method: This either delays the distribution or reserves jurisdiction until the pension matures. Once matured, the judge will determine the proper share to which each party is entitled and divide the benefits accordingly. The advantage of this approach is that the spouses have an equal risk of forfeiture, and it is favored when there are insufficient assets to offset the award of the pension to the employee-spouse alone or when evidence is inadequate to establish present value. However, the disadvantage is that it prolongs the parties’ entanglement with each other.
If you are considering divorce, it’s important to retain the services of an experienced Connecticut divorce attorney to help you navigate the pitfalls of dividing retirement assets and to protect your rights to all of your property.