Commnity Property Interest in Employee Benefit Plan of Spouse

COMMUNITY PROPERTY INTEREST IN EMPLOYEE BENEFIT PLAN OF SPOUSE

An action for dissolution of marriage often involves the division of community property. Typically, this involves property that is in the control and possession of either spouse. However, community property is often in the control of a third party not involved in the divorce proceeding. This scenario commonly occurs when one of the spouses has an employee benefit plan (such as a 401k) in which the other spouse has a community interest. In such a scenario, the third party who controls the employee benefit plan can be joined as a party to the action through a procedure called “joinder.” Joinder is permitted in cases in which a third person controls an interest subject to disposition in the divorce proceeding and the person to be joined is indispensable to a determination of that issue or necessary to enforcement of any judgment made on that issue.

In regard to an employee benefit plan in which either party to the proceeding claims an interest, the clerk shall upon application by a party enter an order joining the plan as a party to the proceeding. Family Code Sec. 2060(a). An order or judgment in the proceeding is not enforceable against an employee benefit plan unless the plan has been joined as a party to the proceeding.Family Code Sec. 2060(b). It is important to note however that the failure to join an employee benefit plan does not affect the interest of a party in the plan, but merely the enforceability of a judgment against the plan. See Marriage of Gowan (1997)54 CA4th 80, 91, 62 CR2d 453, 459.

The procedure for joinder of an employee benefit plan involves several steps. First, the joinder order is issued by the court. The joinder order must thereafter be served on the administrator of the plan. Service of the joinder order serves two functions: 1) it provides the administrator of the plan notice that someone is claiming an adverse interest in the plan and 2) it triggers the employee benefit plan’s opportunity to respond to the order.

Quite often, the employee benefit plan turns out to be the most substantial asset subject to disposition in a divorce proceeding. Accordingly, it is advised that you consult with an experienced attorney when a community interest is asserted in an employee benefit plan.

Please note that this article is not legal advice and is not intended as legal advice. The article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article does not create any attorney-client relationship between you and the Law Offices of Kenneth U. Reyes, P.C. This article is not a solicitation.

Attorney Kenneth Ursua Reyes is a Board Certified Family Law Specialist. He was President of the Philippine American Bar Association. He is a member of both the Family law section, Estates and Trusts section, and Immigration law sections of the Los Angeles County Bar Association. He is a graduate of Southwestern University Law School in Los Angeles and California State University, San Bernardino School of Business Administration. He has extensive former CPA experience prior to law practice. LAW OFFICES OF KENNETH REYES, P.C. is located at 3699 Wilshire Blvd., Suite 700, Los Angeles, CA, 90010. Tel. (213) 388-1611 or e-mail kureyeslaw@gmail.com or visit our website at Kenreyeslaw.com