You may have heard the nightmare stories. Sometimes, the indignation is even palpable. The prospect of going through a divorce is bad enough. However, the uncertainty of what happens to retirement accounts when you get divorced can make it seem even worse.
For some, it may mean dividing up government pensions. Although a number of corporations still reward their employees with pensions, others have turned to 401K match contribution plans. You or your spouse may have put savings into Individual Retirement Accounts (IRAs). Either of your employers may have offered deferred compensation as part of retirement benefits. All of these plans will have some value and may be factored into equitable distribution.
Retirement Accounts as Marital Assets
First and foremost, retirement accounts are considered marital assets regardless of the name that appears on the account. Yes, that means the money deducted from your paycheck targeted to your 401K plan is a marital asset. However, time factors into the valuation. Retirement account investments are considered marital assets from the date you wed until the filing of the divorce complaint. Contributions made before or after either of those dates are not subject to equitable distribution.
Parties involved in divorce actions are required to supply documentation concerning all retirement accounts. The premise of dividing the accounts is based on their purpose at the time of investment. Presumably, the retirement savings were meant for the couple to live on when they left the workforce.
In some cases, a pension expert may be retained to provide a value of the investments. The parties may attempt to negotiate the split of the retirement benefits as part of a property settlement agreement. Like other marital assets, the length of the marriage will be one of the factors considered in dividing pension, 401Ks or IRA benefits.
Couples may decide to use retirement benefits as a bartering tool. For example, one might sign off on their portion of the family home in exchange for their pension remaining untouched. If the parties cannot come up with an agreement, the court will decide the matter.
Qualified Domestic Relations Order
Once the division of the retirement accounts is established, the court will issue a Qualified Domestic Relations Order (“QDRO”). Administrators of pension funds and other retirement benefit accounts are all familiar with QDROs. The family court judge signs the order directing that the retirement benefits are allocated according to its content.
Contact Us
Concerned about what happens to your retirement benefits if you divorce? The Law Offices of Sam Stoia can help you understand how equitable distribution works when it comes to retirement savings. If you are concerned that your spouse is trying to negate your claim for benefits, we can also help. Contact us to schedule a complimentary meeting.