Retirement Account Distribution
Contrary to popular belief, once a Judgment of Divorce is signed by a Judge, the divorce process is not over. There are additional steps parties need to take in order to effectuate the provisions of an Agreement, or Order, to distribute assets such as retirement accounts and real estate from one spouse to another.
- Retirement Account Distribution
Qualified retirement plans such as defined benefit plans, employee stock ownership plans (ESOP) and 401(k) plans are all governed by the Employee Retirement Income Security Act (“ERISA”). ERISA is a federal law that governs the distribution of benefits from an employee/participant to the non-titled spouse or alternate payee. If a retirement plan is private, such as the ones mentioned above, a Qualified Domestic Relations Order (“QDRO”) is needed to distribute the funds in that retirement plan. A QDRO begins as a Domestic Relations Order (“DRO”) which is then submitted to the retirement plan for qualification. Once qualified by the plan, the DRO becomes a QDRO.
Another distribution tool for a retirement plan is a Court Order Acceptable for Processing (“COAP”). Retirement benefits provided by the military, federal government, county, city or state do not classify as qualified retirement plans, and therefore ERISA terms do not apply. Since federal employees cannot distribute their retirement plans through a QDRO, a COAP is needed.
The language in a QDRO or COAP must mirror the language in a Stipulation of Settlement. When drafting a Stipulation, it is important to include all of the benefits that are available. If possible, it is best to obtain a description from the plan to clarify what benefits should be included. If a possible benefit is not included in the Stipulation of Settlement, the QDRO or COAP cannot include it, and malpractice may result.
Some pensions end at death, but many pensions provide for payments to a surviving spouse or dependents, such as children. A survivor benefit is a benefit which is paid by a pension plan to the designated alternate payee upon the death of a participant. The federal law, ERISA, requires private pensions plans to provide benefits to the alternate payee. Unless waived by a spouse, any payment during a participant’s lifetime must be as a qualified joint and survivor annuity (“QJSA”). A QJSA is an annuity for the participant’s life with a survivor annuity for the alternate payee’s lifetime. The survivor annuity may not be less than 50% or more than 100% of the annuity payable during the joint lives of the participant and alternate payee.
- Different Deeds to Sell/Distribute a Residence
There are numerous types of deeds a grantor (the seller of the property) can execute while in the process of either selling or relinquishing their residence. In a divorce case, the transfer is most typically between husband and wife (as grantor) to the other spouse (as grantee). The parties could execute a Warranty deed, Quitclaim deed or a Bargain and Sale deed.
- Warranty Deed
A Warranty deed provides the greatest protection to a grantee (a person who buys a residence). A Warranty deed assures the grantee that the grantor is conveying both present and future covenants on the property. An example of a present covenant is the covenant of seisin. The covenant of seisin warrants that the title is being conveyed to the grantee. Moreover, a future covenant, such as the covenant of further assurances, requires the grantor to do whatever necessary to clear a defective title. A warranty deed is generally used the most in property sales.
- Bargain and Sale Deed
A Bargain and Sale deed is the most typical deed that is utilized in a divorce proceeding. It can also be used when a deed is transferred between close family and friends or from a foreclosure or tax sale. A Bargain and Sale deed does ensure that that the grantor has title to the land but, does not guarantee that the property being sold is free of encumbrances. However, a Bargain and Sale deed can include covenants against grantor’s acts. This is a promise within the deed by the seller that it has not done any act which would encumber the title it seeks to convey.
- Quitclaim Deed
A Quitclaim deed is an instrument for conveying interest in a property that excludes a warranty. The grantor is essentially disclaiming and turning over its interest without defining what the interest is. A Quitclaim deed is normally used to add or remove a person from the title, such as a spouse or family member. Quitclaim deeds are sometimes used during a divorce proceeding when a spouse is being removed from the title of a residence or property.
For those struggling with divorce deeds or other family issues, contact Fass & Greenberg today to begin building your case. Our Garden City NY family attorneys are prepared to help you have the most successful case possible.