Dividing Unvested Pensions in an Indiana Divorce - an Asset that is not Divided
Dividing assets in a divorce can be complex, but when it comes to pensions, the process can become challenging. Many individuals assume that all retirement benefits accumulated during the marriage are subject to division, but Indiana law treats unvested pensions differently. Indiana courts have consistently ruled that unvested pension benefits may not be included in the marital estate.
Understanding Property Division in Indiana
Indiana follows an "equitable distribution" model in divorce cases, meaning marital property is divided in a way that is fair, but not necessarily equal. Indiana law defines marital property broadly, including assets acquired before and during the marriage. However, not all assets are subject to division, and the treatment of unvested pensions has been a key issue in many cases.
Unvested Pensions: A Special Case
A vested pension is one where the employee has met the necessary years of service to receive benefits. An unvested pension, on the other hand, is one where the employee is still working toward eligibility and has not yet secured those benefits.
Under Indiana Code § 31-9-2-98, a pension must be vested to be included in the marital estate. The reasoning behind this is that unvested pensions are uncertain future assets, meaning they may never materialize if the employee does not meet the service requirements.
The Recent case of Delaplane v. Delaplane
During their 11-year marriage, Husband worked in a government position that provided retirement benefits through the Indiana Public Employees' Retirement Fund (PERF). However, at the time of their divorce, Husband had only accumulated 5.83 years of creditable service, falling short of the 10 years required for his pension benefits to vest.
When dividing marital assets, the trial court ruled that Husband’s unvested pension should be included in the marital estate and awarded Wife a portion of it. To compensate for her share, the court ordered an equalization payment to Wife, treating the pension as if it were a guaranteed benefit.
Believing this was an error under Indiana law, Husband appealed the decision. He argued that unvested pensions are not marital property under Indiana Code § 31-9-2-98 and should not have been included in the division of assets.
Indiana Court of Appeals Ruling
The Indiana Court of Appeals reversed the trial court’s decision, reaffirming that unvested pensions are not subject to division in divorce proceedings. The court highlighted the following key points:
Unvested pensions do not qualify as marital property under Indiana Code § 31-9-2-98.
The trial court wrongly included a future, uncertain benefit in the marital estate.
The equalization payment ordered for Wife was improper because it was based on a pension that may never vest.
This ruling reinforced Indiana’s long-standing approach that only vested retirement benefits can be divided in a divorce.
Key Takeaways for Divorcing Spouses
Unvested pensions are NOT considered marital property in Indiana.
If your pension is unvested at the time of divorce, your spouse is not entitled to a share.
If you are facing a pension-related dispute, it is crucial to have an experienced attorney who understands Indiana’s complex property division laws.
Why You Need a Family Law Attorney
Dividing assets in a divorce can be complicated, especially when it comes to retirement accounts and pensions. If you are going through a divorce and have questions about your retirement assets, consulting an attorney can help protect your financial future.
📞 Contact Vining Legal today for a free consultation at (317) 759-3225 to discuss your divorce, property division, and pension rights.
