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Do I Have To Split My 401k In A Divorce

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Is My 401k Considered Marital Property

MARRIAGE & MONEY | How Do I Protect My 401K From My Husband In a Divorce?

Most states view retirement benefits that you accrued during the marriage as community property. However, like all property, any benefits you accrued before the marriage are your separate property. Separate property is not considered in the divorce settlement it is your sole property and your spouse has no right to your separate property in a divorce.

A 401k is a defined contribution plan. This type of plan is voluntary and you are in charge of maintaining and managing your benefits. You have control over how much you contribute each paycheck and your employer may contribute as well. Although you may have been the sole contributor and manager of this fund, it is still accessible in the divorce. A 401k will be viewed as community property and will be divided in the divorce.

The important thing to deal with regarding your 401k is determining the value of the plan, DURING the marriage. Because a 401k can be distributed at the time of the divorce, it is a present value that must be considered in the agreement. Note, a spouse is only entitled to half of the 401k amount that accrued during the marriage.

Benefit Payments Depend On The Qdro

There are several options for payouts, each with different terms that could work better in certain situations:

  • The QDRO can establish an independent 401 or roll the assets into another plan
  • There could be a lump sum payment at the time of the order
  • The money can stay in the original plan, with the secondary spouse able to control their share

Contact Accomplished Scottsdale Divorce Attorneys For Help Protecting Retirement Savings

From the Scottsdale, Arizona office of Clark & Schloss Family Law, P.C., our attorneys help divorcing spouses protect 401 savings and other retirement funds. To schedule a free initial consultation with our office, call or contact us online.


  • I found Mr. Schloss through the recommendation of my father. I was involved in a very serious matter. – Joseph

  • Mr. Schloss has been an immense help to my family and me. I have known him since 2006, after seeking legal representation in a custody case regarding my son. –read more

  • I feel so fortunate to have hired Michael Schloss to assist me with my divorce and child support. – Dawn

  • I can’t begin to say how pleased I am with the firm’s service Mike is truly an amazing attorney with family law matters. – Rob

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How Do We Split A 401 In A Divorce

After 14 years of marriage, my wife and I are divorcing. We dont have many assets, but we have agreed to sell our home and divide the proceeds and will split our debt equally. I have been a stay-at-home parent, but my wife has always worked. As a result of her employment, my wife accumulated a sizeable 401k retirement fund throughout our marriage, but she doesnt agree that Im entitled to any of it. Is this true?

Aside from child custody and parenting time, property division is often a contentious topic in divorce proceedings. Couples who have spent years building a life together now have to tediously sort through property and decide whether it belongs to one or both spouses and how to divide it. While no divorce is easy, this article should provide insight into fundamental property division laws, including retirement assets.

Dividing Retirement Accounts During A Divorce In Illinois

Massachusetts Divorce 401k

When couples divorce in Illinois the accumulated value of the retirement assets during a marriage is considered marital property to be divided. There are three major types of retirement benefits that need to be considered when a divorce occurs: defined benefit plans, contribution plans, and social security benefits.

Dividing Pension Plans

A defined benefit plan or pension plan is something an employer offers an employee without the input of the employee. It is something an employee will get without any contribution. For the most part, defined benefit plans have disappeared unless you work for the government or you are an executive of a larger corporation.

The first step in dealing with a pension plan in a divorce during the asset division process is to value it. This is not an easy task and typically requires hiring an actuary. The actuary will then define three items:

  • the value of the monthly pension payments
  • the percentage of the benefit to be considered a marital asset
  • define the amount of the pension the non-employee spouse is entitled

After the value of the pension is determined a decision will need to be made on how to split the asset. There are two options:

Splitting Contribution & 401k Plans

In some cases separating the asset will require a QILDRO, as described above before the 401k will roll over. Other times, a copy of the divorce paperwork is all that is required. This is situational based on the 401k plans.

Dealing with Social Security Benefits

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Stay On Top Of Paperwork

Send all court orders and divorce agreement documents to plan and account custodians immediately. If you delay too long in doing this, then you may forfeit what is due to you because your paperwork is outdated and invalid. Although private pension plans are required under the Pension Protection Act of 2006 to accept any court order regardless of when it was issued, it is still critical to submit this paperwork before any of the plan or pension assets are distributed. If you dont, you may be faced with the prospect of trying to recover those assets yourself, which can incur further legal fees and bureaucratic wrangling.

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What Is An Ira

An Individual Retirement Account is a tax-advantaged investing tool that is used to set aside funds for retirement savings. There are several kinds of IRAs, each with different possible tax liabilities, depending on a persons employment status.

If you take money from an IRA prior to age 59 ½, in most cases, youll be subject to a 10% withdrawal penalty.

An individual who has earned income can contribute up to $6,000 in 2020 to an IRA.

Depending on what you earn, you may be able to deduct all or part of your contribution on your tax return. If you are receiving spousal support that is taxable to you at the federal level, you are considered to have earned income to contribute to an IRA.

The funds deposited into the IRA will grow tax-deferred until Required Minimum Distributions are mandatory. That takes place when the account owner turns 70 ½, except for a Roth and an inherited IRA.

When the funds are withdrawn, the individual who owns the account pays income tax on the amount taken out. It is a great strategy to wait until retirement to take distributions since most people are in a lower tax bracket once they stop working.

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How Can I Keep My Retirement Benefits When I Divorce

You and your spouse can agree that each of you will keep the retirement accounts under your own name and not divide them. Or, you can “cash out” your spouses share as part of the divorce settlement. Another option is to agree to exchange community property equal to the value of your spouses share of retirement.

  • For example: assume that your employer-based 401 account has a balance of $10,000 accumulated during the marriage. You and your spouse purchased a truck now valued at $10,000. You exchange your share of the truck for your spouses share of the 401 account .

Note: Retirement savings plans like 401s are valued as of the date of divorce similarly, the value of the truck is its fair market value at the time of divorce, not purchase price.

How Is A 401k Divided During A Divorce

Do I get half of my husband’s 401k in divorce?

Although a divorce decree can stipulate that retirement funds must be divided, when a 401 is involved, the only official way to separate the funds is by executing a Qualified Domestic Relations Order .

As you are going through the divorce process, it is essential that you identify retirement assets so that they can be properly addressed in the divorce decree.

The divorce decree must order the division of all affected retirement accounts and detail which spouse receives what as part of the court order.

To execute the separation of the 401 plan, a QDRO must be drafted that will tell the 401 plan administrator how to divide the retirement asset.

Its strongly recommended to submit the draft QDRO to the 401 plan administer for their review and approval.

Once you have ensured that the QDRO meets the requirements of the 401 plan administrator, you must then submit the QDRO to the court for their approval.

The endorsed-filed copy of the QDRO can then be resubmitted to the plan administrator to effectuate the transfer.

The QDRO establishes an alternate payee who will now also be able to receive payments from a 401.

Each retirement account will require a separate QDRO , so if you have multiple retirement accounts, be prepared for this eventuality.

If a spouse takes a lump sum payment, the IRS will treat that as ordinary income and there will be a tax liability on the amount ).

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How Are 401s Typically Split During A Divorce

Any funds contributed to the 401 account during the marriage are marital property and subject to division during the divorce, unless there is a valid prenuptial agreement in place. For example, if you were married for five years and during that time you contributed $50,000 to your retirement account or pension plan, your spouse would likely be entitled to a 50% share or $25,000.

Keep in mind that whether or not your spouse ends up with part, all, or none of your 401 depends on how your overall marital assets are split. For example, if your spouse also has a retirement account worth a similar amount, you may each decide to keep your own accounts.

Questions About A 401 In Divorce

If you are thinking about filing for divorce and want to know about protecting your assets and savings, contact the Joshua Wilson Law Firm in Raymore today. You can reach us by phone at 331-9968 or fill out our online form. During any stay-at-home orders or for your peace-of-mind, our office is virtually capable to keep you connected while staying safe.

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Financial Tips To Get Through A Divorce

  • Divorce could disrupt your retirement plans. Not only could lose assets during the process, but it can also get expensive. A financial advisor can help you create a financial plan for your needs and goals after divorce. SmartAssets free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If youre ready to find an advisor who can help you achieve your financial goals, get started now.
  • If youre splitting up, make sure you protect your assets. Start by thinking about these five steps to secure your finances during a divorce.
  • On the bright side, many marriages actually do make it! And if yours thrives, follow these four wealth management tips for married couples.

Get Key Details From Your Financial Institution On Your Joint Account

What Do I Pick For My 401k?

You may have signed a form to say you dont want to receive information from your financial institution about your joint account. Now that your situation has changed, ask your financial institution to start sending you bank statements and all other information about your joint account.

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How Is An Ira Split In A Divorce

A QDRO is not required to divide the assets in a traditional or Roth IRA, but you must still make sure the split is done pursuant to a court order such that you do not have to pay penalties or taxes.

Your divorce decree must specify that the IRA will be split, including dollar amounts or percentages and the time frame in which it must be completed.

The custodian of the IRA, which is generally a bank, a brokerage or a financial services company, will need a copy of the divorce decree, along with appropriate paperwork to initiate the split.

In anticipation of the split, a destination IRA should already be in place so that the funds can roll over into it.

When an IRA is split between spouses and not done as a trustee-to-trustee transfer, then it is generally considered a taxable event for the IRAs original owner.

This means they would not only pay income taxes on the distribution, but also a 10% early withdrawal fee if they are under 59 ½ years old. There may also be early withdrawal fees at the State level. For instance, in California, the early withdrawal fee is 2.5%. Roth IRAs are treated differently because contributions have already been taxed, but the Roth owner could still face tax or withdrawal penalties depending on their age and how long they have owned the Roth IRA.

Pension plans are separated using a QDRO , but IRAs are separated in a process known as a transfer incident to divorce ).

Are Pensions Included In Divorce Settlements

In a divorce, pensions are considered along with the other financial assets of the marriage. Its important to note that a divorce by itself does not determine who gets what or who is entitled to the home, savings etc. The sharing of the assets is decided separately, in a financial agreement or financial settlement.

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How To Keep Your Retirement Assets

During divorce, community property is divided so that each spouse ends up with an approximately even share of the marital estate. Assets in a 401 may be split, or one spouse can keep the entire 401 by conceding other marital property.

One spouse often has larger retirement assets than the other, owing to different career paths or investment choices. If each spouse has a retirement account but the balance of one is significantly higher, the spouse with the smaller account may receive assets from the other spouse.

If you are involved in a high net worth divorce, you and your spouse may have several forms of retirement savings. Properly accounting for these assets is essential to ensuring they are given due consideration during the property division process.

Retirement plans have their own administrative rules stating how and when assets may be withdrawn by or paid to an ex-spouse. In some cases, an ex-spouse cannot be paid until they retire, while in other cases payment can be made before the recipient reaches retirement age. Knowing the rules of your plan empowers you to make smart decisions during settlement negotiations.

One of our focused divorce lawyers can talk through your options and come up with a strategy to exit the marriage with financial confidence.

Can You Withdraw From Your 401 Before Divorce

Divorce And Your 401(k). How is it split up? What is a QDRO?

The fear of losing your retirement plan might tempt you to withdraw your 401 funds when you suspect that you and your spouse will divorce in the near future. While you may believe this action would protect your retirement funds, this action will have consequences during your divorce. When you withdraw your 401 funds, the court will view this action as if you took an advance on your share of your marital property that is subject to division.

As a result, the court will require you to reimburse your spouse for the funds you withdrew from your 401 plan. You can lose out on other pieces of community property by taking this action. In addition, the court may require you to pay a pre-tax, pre-penalty valuation of the funds, depending on your reason for withdrawal.

Dividing your retirement plan may be a difficult challenge to tackle during your divorce negotiations. If you need assistance advocating for your needs at the negotiation table, contact a California divorce attorney to represent you at these discussions.

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Negotiating In A Divorce

It is possible to discuss and negotiate the 401 plan with your partner during a divorce. For example, if you are using mediation, this can be a topic that you can discuss. Perhaps there is an agreement you can make when it comes to the 401 plan. Your partner may understand and agree that this is your money. You could make a deal regarding something else.

  • Offer Another Asset

For example, you may be able to talk to your partner and negotiate that they do not get any money from the 401 plan. Instead, they can get another asset in the divorce. If this is the case, then you should make sure that this exchange is legally binding and in writing. Namely, it should be part of a divorce settlement. Alternatively, it can be in agreement documents that are signed by both parties. This way, they cannot claim the money later on.

  • Need for Mediation

One thing that you cannot do is tell your partner that they cannot touch your 401 plan. This is going to cause animosity during meditation proceedings. This should be a time for you to negotiate and be fair. Mediation can be a successful process when you make just decisions with your partner. You should not demand that they leave your 401 plan alone, as this will not have the outcome you are looking for.

How Do You Divide A 401 In A Divorce

Retirement accounts are there to provide for you after your ties to work and your career have ended or are drastically altered. They give you the freedom to look beyond the paycheck and embrace life outside of work.

While divorce can lead to a happier time in your life as well, it can also have an impact on the nest egg youve been nurturing for so long. Marriages can mean shared assets, even when theyre tied more closely to one spouse. When one partner spends their life in a career that provides healthy retirement benefits, both partners can still have plans for it.

This is why legal advice can prove vital. Its often important to consult a divorce lawyer experienced in asset division in such an impactful process as dividing a 401 in divorce.

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