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Federal retirement plans can be part of a divorce settlement

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When federal government employees and retirees are going through a divorce, there is an additional financial asset to consider when looking at property division. A federal Thrift Savings Plan can be divided by court order at the end of a marriage as part of a divorce settlement.

A TSP is not considered to be outside the bounds of marital assets, and it can be handled in several ways during a divorce. Both parties can come to a mutual agreement about how the TSP will be handled in the property division stage, or the court will divide it according to state law.

In order to implement the division, there will need to be a Retirement Benefits Court Order, including the official decree of divorce, legal separation or annulment. It can also include the approved property settlement that comes alongside the official decree. A standard Qualified Domestic Relations Order used for most retirement plans might work in some cases.

A court order will freeze the account from issuing any withdrawals or loans during the pendency of the divorce. If a loan from the TSP balance is pending, it is part of the balance for the purpose of calculating the property division by default. However, an outstanding loan can be specifically excluded in the property settlement and court order. The division of the TSP can be handled in the property settlement as either a specific dollar amount or a percentage of the total balance.

When preparing for divorce, a divorce lawyer is an essential part of the process. Counsel can can help a divorcing spouse navigate a high net worth divorce, including retirement plans, businesses and other complex assets, and reach a fair settlement.

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