Big things can happen to your retirement savings and your 401k during divorce and you need to know how to protect your assets. You have worked your whole life to make sure your retirement is secure and now you and your spouse are about to get a divorce. Thinking about what you can lose is enough to turn your stomach into knots. If you have been contributing to a 401k during the marriage, it will be considered part of the marital property in divorce. How it will be divided will depend upon many factors. Expert family law attorneys (found right here!) are your best bet at fighting to keep your 401k during divorce!
Who Gets Your 401k During Divorce?
First, there is no sense in trying to hide the 401k or calling up your plan administrator to try to block your spouse’s attorney access to the plan information. Your spouse is legally entitled to this information so his or her attorney can work the retirement plans into the divorce settlement. However, if your spouse also has any retirement accounts, you are also entitled to his or her plan information for the same reason.
The one thing you will want to do is make sure there are no withdrawals from any of the plans during the divorce proceedings. While both you and your spouse are entitled to the plan information, neither of you can make a withdrawal from any of the accounts during the divorce proceedings. Doing so will only lead to legal trouble in the future – and taking money out of a retirement plan like a 401k during the divorce process can put you on the hook to repay what you withdrew from the marital estate. This is because the courts consider this a dissipation of the marital estate.
Every plan will have its own rules. For instance, some plans may allow the other party to take his or her share of the retirement account once the divorce is final. Other plans may hold the funds until retirement age even though the parties have divorced. It is best to sit down with your plan administrator prior to filing so you know all of your options (or have your attorney go over your documentation for you).
Common Divisions of 401k’s and Retirement Plans During Divorce
Generally speaking, the options below are common when 401k’s (and other retirement) accounts are being split during a divorce:
- Split All Assets – both parties can decide to evenly split all retirement accounts after the divorce. This will require a Qualified Domestic Relations Order. However, there are significant complications and legalities when drawing up this document, so make sure you are using a divorce attorney experienced in this area.
- Asset Tradeoff – if you want to keep your account intact, you can offer to give up other marital assets in place of the 401k. This can also get a bit technical because your spouse’ attorney will more than likely bring up the long term value of the account as well as any tax implications as a result of the settlement.
Two other possibilities are the liquidation of a part of the retirement account to pay off your spouse as well as rolling over the spouse’s portion of the retirement account into an IRA. Both of these options have restrictions to them and can only be used in very specific situations. Speaking with one of our expert family law attorneys for a free consultation is your first step to getting what you deserve!