Whether you have spent decades saving for retirement or you are still in the early stages of your career, there is a good chance that your retirement or investment account is one of your most valuable assets. This also means that it is likely to be one of the most important assets involved in your divorce.
If you have accumulated wealth in a 401(k), pension, or other retirement or investment account and you are preparing to get divorced in New Jersey, this article provides a brief introduction to what you need to know.
5 Important Considerations for Dealing with Retirement and Investment Accounts During Your Divorce
1. A Retirement or Investment Account Can Qualify as Separate and Marital Property.
If you opened your retirement or investment account during your marriage, the entire value of the account will qualify as marital property. In a divorce, both spouses have a right to claim a portion of their marital property (more on this below). However, if you opened your account prior to your marriage, then any savings you accumulated prior to your marriage should be yours to keep as separate property.
2. The Portion of Your Account that Qualifies as Marital Property is Subject to Equitable Distribution.
The portion of your retirement or investment account that qualifies as the marital property will be subject to equitable distribution – just the same as all of your other marital assets. Equitable does not necessarily mean equal, and determining what percentage of the marital property portion of your account is on the table requires careful analysis of a variety of different factors.
3. Determining How to Equitably Split a Retirement Account is Not Necessarily a Straightforward Process.
Even once you determine what portion of your account (or your spouse’s account) qualifies as marital property, determining how to equitably distribute that portion is not necessarily a straightforward process. Should you consider the value of the account now? Or, should you consider its potential value at the time of retirement? If the latter, how can you arrive at a mutually-agreeable calculation, and how will this impact the distribution of your other marital assets?
4. There are a Variety of Options to Consider, Some of Which are Simpler than Others.
Once you decide what value to place on the distributable portion of your retirement or investment account, you actually have a variety of options for making the distribution. While one option is certainly to split the retirement account, other potential options include:
- Each spouse keeps his or her own retirement savings;
- One spouse gives up his or her interest in the account in exchange for receiving other marital property; and,
- Liquidation of certain assets in order to “buy out” one spouse’s interest in the other’s retirement account.
5. You May Need to Obtain a Qualified Domestic Relations Order (QDRO).
If you will be splitting a retirement account as part of your divorce, you may need to obtain a qualified domestic relations order (QDRO). Accounts that are subject to ERISA typically require a QDRO, and you will need to ensure that your QDRO satisfies the necessary legal requirements so that funds can be distributed to an “alternate payee.”
Speak with an Experienced New Jersey Divorce Lawyer in Confidence
Are you considering filing for divorce in New Jersey? Or, are you concerned that your spouse may file, and do you want to make sure that you protect yourself accordingly? If so, we encourage you to contact us for a confidential initial consultation with one of our experienced attorneys. To schedule an appointment at our family law offices in Hackensack, please call (201) 654-4263 or inquire online today.