401k and Divorce: Splitting Retirement Assets With Your Spouse
New Jersey is an equitable distribution state, meaning that during divorce, marital assets and debts are divided between spouses fairly, but not necessarily equally. To carry out equitable distribution, the courts evaluate all types of assets differently and look at factors such as each spouse’s contribution to the marital asset. Retirement accounts, such as 401k accounts, however, are a special animal and are subject to particular rules when divided as marital property in a divorce proceeding. What can you expect when dividing this account in your divorce?
A good rule of thumb is that any monies put into a 401k account during the term of the marriage is subject to division in a divorce. The term of the marriage generally means the date you were legally married until the date that the complaint for divorce was filed. And, money put into the account for the purpose of equitable distribution includes employee or employer contributions to the account as well as any interest income generated.
How is my 401k account valued and actually divided? Your employer or human resources department should have all of the information regarding your 401k account on file, if you do not have your prior statements on hand. In cases of confusion or dispute regarding the value of the account, a formal appraisal of the 401k can be done by a pension appraisal company. This is typically not necessary, however. Once the 401k value is established, a Qualified Domestic Relations Order (known as a QDRO) is drafted by the pension company and signed by the divorce judge. This order is sent to the plan administrator and is kept on file.
Most frequently, 401(k) accounts and other types of corporate retirement accounts generally do require QDROs. If the account requires a QDRO, the QDRO will specify the percentage or the formula used to determine the your spouse’s share.
When will my spouse get their share of my 401k? Depending on the plan, your spouse may be able to roll take their share immediately with some possible tax consequences. If not, they will wait until your retirement. You and your spouse should speak with your financial planner if you have any questions regarding your retirement assets.
It is always prudent to speak with your human resources department or the plan administrators if you have questions about what type of plan you have, when you began contribution to that plan and any details about when your plan would go ino effect.
If you have questions regarding your retirement assets and divorce, or if you are divorced but your retirement assets were not addressed at that time, please contact us to schedule a consultation with one of our qualified family law attorneys experienced in divorce and equitable distribution law here in New Jersey.
Read More:
Divorce Horror Story: A Do-It-Yourself Divorce Gone Wrong [Retirement]
Gray Divorce: Splitting Your 401K & A Lifetime of Assets
Help Your Golden Years Stay Golden: Protecting Retirement Funds During Divorce
