Dividing a TSP during divorce

by | Aug 15, 2017 | Divorce |

When going through a divorce, estranged California couples must divide their marital assets. Although some can come to an agreement on their own, there are certain types of assets that require some more attention to detail. These include retirement accounts, such as Thrift Savings Plans that are owned by federal employees.

A court might decide how assets are split, or couples may be able to make decisions on their own. To divide a TSP, a Retirement Benefits Court Order is needed. Legal documents like a court-approved divorce decree, settlement papers or a Qualified Domestic Relations Order could serve as a RBCO in some cases.

A TSP cannot pay more than an account balance, but court orders could list a percentage or dollar amount to be paid. TSP accounts cannot be used for withdrawals or loans when a court action takes place because a court order will freeze an account until a divorce action is finalized. Unless otherwise noted in a court order, any outstanding balance on a TSP account is included when calculating an award to a former spouse.

While a federal retirement package includes a Federal Employees Retirement System or Civil Servant Retirement Pay, different rules apply to annuities and the TSP. Handbooks are available to explain these rules.

When a couple is willing to negotiate and work together, many options may exist to handle the property division stage of a divorce. A spouse might be entitled to a portion of a retirement account but might want to receive something else of equal value instead. Both partners must prioritize the assets they value most and compromise when necessary. If a couple has a few areas they cannot agree on even after their respective attorneys have attempted to negotiate an accord, mediation could be a solution.