Grey divorce with a pension in payment: Florida

The short version: The marital part of Linda's pension was split by court order, with Ron receiving his share out of each monthly check and staying the survivor beneficiary. Ron's 401(k) and the house were split equally. Ron pays Linda modest durational alimony for three years, sized to cover her health insurance until Medicare and the gap until she claims Social Security. Florida no longer allows permanent alimony, so long-term support was never on the table.

The situation

Linda is 63, a retired hospital nurse already receiving a pension from her employer's defined benefit plan. Ron is 66, retired, collecting Social Security and holding a 401(k). They were married 31 years and have no minor children. Linda had health coverage through Ron's retiree plan.

The route

An uncontested dissolution with a marital settlement agreement prepared through FairWell. They also hired a QDRO specialist to draft the retirement plan orders and a certified divorce financial analyst to model two separate retirements before agreeing on alimony. Florida's simplified dissolution was not an option because it requires that neither spouse seek alimony.

Property: equitable distribution

Florida divides marital assets and debts under equitable distribution, and the court starts from the premise that the split should be equal unless there is a reason to do otherwise. Neither had a reason to argue for anything else.

1. Find the marital share of the pension. 28 of Linda's 32 years of service fell during the marriage, so 87.5% of the pension is marital: $2,800 a month. The remaining $400 a month is Linda's separate property.
2. Split the marital share. Half of $2,800 is $1,400 a month to Ron. Linda keeps $1,800.
3. Use the right kind of order for a pension already being paid. Because the pension was in payment, the plan could not create a separate new pension for Ron. The qualified domestic relations order (QDRO) uses a "shared payment" approach: the plan sends Ron his portion of each check directly.
4. Deal with the survivor benefit. When Linda retired she chose a joint and survivor pension naming Ron. That choice is generally locked in once payments start, so the QDRO keeps Ron as the surviving spouse. If Linda dies first, Ron continues to receive a survivor payment.
5. Split the 401(k). A second QDRO moved $120,000 to Linda, who rolled it into her own IRA. A transfer made under a QDRO is not taxed when it moves.
6. Sell the house. Net proceeds of $360,000, $180,000 each.

Social Security is not divided in a Florida divorce, because federal law controls it. Linda checked her own options separately: because they were married more than ten years, she can claim a divorced spouse's benefit on Ron's record from age 62 if it is higher than her own and she stays unmarried. In her case her own record was higher.

Alimony under the 2023 reform

Florida's 2023 alimony law (SB 1416) eliminated permanent alimony. Courts can now award temporary, bridge-the-gap (up to 2 years), rehabilitative (up to 5 years) or durational alimony. For durational alimony:

• A marriage of 20 years or more is long-term, and durational alimony cannot last longer than 75% of the length of the marriage. For 31 years, the ceiling is about 23 years.
• The amount cannot exceed the recipient's reasonable need or 35% of the difference between the parties' net incomes, whichever is less.

After the property split, Ron's gross income is $3,800 a month ($2,400 Social Security plus $1,400 from the pension) and Linda's is $1,800. The analyst estimated net incomes of about $3,450 and $1,650 (illustrative). The difference is $1,800, so the 35% cap is $630 a month.

Linda's real gap was temporary. She needed health insurance for two years until Medicare at 65, and she planned to claim her own Social Security at 66. They agreed on $600 a month of durational alimony for three years. Under federal tax law, alimony paid under an agreement signed after 2018 is not deductible for Ron and not taxable income for Linda.

Health coverage

Ron was already on Medicare. Linda's coverage under Ron's retiree plan would end with the divorce. Divorce is a qualifying event under COBRA, which can let a former spouse continue group coverage for up to 36 months if the plan is subject to COBRA and the plan is told within 60 days. Linda priced COBRA against a marketplace plan before the agreement was signed and the cheaper option was built into the alimony figure.

What they decided, and why

• Divide the pension rather than offset it. They could have cut Ron's pension share and canceled the alimony instead. They did not, because the pension split is permanent property and the alimony ends in three years. Netting the two would have shortchanged Ron for the rest of his life to solve a three-year problem.
• Keep Ron as survivor beneficiary. It protects Ron, and the reduced joint and survivor amount was already locked in, so changing it would not have increased Linda's checks.
• Short alimony with a clear end. Tying the term to Medicare and Social Security dates gave both of them a planning horizon.

The trade-offs they accepted

• Linda cannot name a new spouse as survivor on this pension.
• They stay financially linked. Splitting each monthly check is simpler than trading the pension share for other assets, but it means the same plan pays both of them for life.
• Durational alimony can still be modified if circumstances change substantially, and it ends if either dies or Linda remarries. They accepted that uncertainty rather than pay more for a lump sum.

Cost and time

FairWell Separation Agreement Prep for both partners US$599, two QDROs at about $750 each, $1,800 for the financial analysis, and attorney review. Under $6,000 total. Florida requires at least 20 days between filing and the final judgment, and at least one spouse must have lived in Florida for six months before filing. Their final judgment of dissolution was entered six weeks after filing.

What would change the answer

• If the pension were a government plan, it might not be governed by federal QDRO rules and would use that plan's own order process.
• If Linda had not yet retired, the order could have given Ron a separate interest with his own start date and payment options.
• If there were a large income gap with no end date in sight, durational alimony could have run much longer than three years, up to the 75% ceiling.

If this sounds like you

• Read grey divorce: separating after 55 and pensions at separation.
• Price health coverage early with health insurance after separation.
• Check the Florida specifics on the Florida hub.