Splitting Retirement in Divorce

The division of assets in a divorce is often one of the most contested and emotional issues. Assets can range from anything such as bank accounts to real estate. The assets acquired during the course of the marriage are considered marital property and subject to division between the parties. This is the case regardless of who holds title or whose name is on the account.

Any money put into a retirement account during the course of a marriage is marital property and subject to division. This is true whether that account is a pension, 401k, IRA or other retirement account. In contrast, any money put into the retirement account prior to the marriage or after the divorce is finalized is not marital property and is not subject to division.

So how are retirement accounts actually divided? Generally, the Courts will award one-half of the marital portion of each party’s retirement account to the other party. By way of example, if John has an IRA with $100,000 in it, $50,000 of which accrued during the marriage, John’s Wife would be entitled to one-half of the $50,000 or $25,000. In certain circumstances where the parties have substantially similar retirement amounts, they can each waive their rights to the other party’s retirement and each keep their own retirement. In other instances, one party may choose to keep their entire retirement account in exchange for receiving maintenance (formerly alimony) or other assets accumulated during the marriage.

At the time the divorce is finalized or after, the parties will prepare what is called a Qualified Domestic Relations Order (QDRO). This is an Order that can usually be obtained through the party’s employer and will divide the retirement accounts pursuant to the terms of the divorce. The QDRO is entered by the Court, sent to the party’s employer (or company that handles their retirement account), and the money is then divided accordingly.

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