If you and your spouse have decided to get divorced, you may wonder what will happen to your 401K or other retirement accounts. Are these accounts subject to the same rules of division as your family’s assets? Here’s what you need to know—including how an experienced family law attorney can help you explore legal strategies to protect your retirement assets.
Understanding Marital Property
In divorce, spouses must divide their marital property. “Marital property” includes all property belonging to the marital estate. Typically, all property a married couple acquires during their marriage becomes marital property. Divorce proceedings designate spouses’ property as marital to distinguish it from separate property not subject to equitable division during divorce. Separate property typically includes property each spouse acquired before the marriage and specific property acquired during the marriage, like inheritances or separate gifts. In Pennsylvania, courts divide marital property equitably or fairly rather than by an equal 50/50 split.
How Do Courts Divide 401Ks
401Ks can become marital property even if only one spouse contributed to the account or the account holder spouse opened the 401K before getting married. The law considers contributions made to a 401K during marriage as marital property, subjecting that portion of a 401K account to equitable distribution. However, when parties get divorced before spouses reach an age to begin withdrawing from a 401K without incurring tax penalties, dividing a 401K will involve a more complex process than simply giving one spouse their fair share of the account. Instead, courts typically rely on Qualified Domestic Relations Orders, which direct the financial institution managing the 401K to distribute a portion of the account’s benefits to the other spouse.
What If I Opened My 401K Before My Marriage?
If you opened a 401K before your marriage, any contributions you made to the account before getting married would constitute separate property not subject to equitable distribution. You will have full rights to the portion of your 401K account arising from pre-marriage contributions. However, the portion of your account representing contributions made after getting married will become marital property subject to equitable distribution in divorce. In a divorce proceeding, the parties may hire accountants to calculate the “separate” and “marital” portions of a 401K account.
How to Protect Your 401K During Divorce
Although some or all of your 401K account balance may get divided in a divorce, you may have legal options for protecting your retirement benefits from equitable distribution. For example, you and your spouse may execute a prenuptial or postnuptial agreement under which your spouse agrees to waive any interest in your 401K. You may also combine estate planning with retirement planning to protect the assets you need to support yourself after retirement, even if you divorce. Working with experienced legal and financial advisors can help protect your retirement benefits in divorce.
Contact a Divorce Attorney Today
If you’re getting divorced, having experienced legal counsel can help you protect your retirement benefits and other critical assets. Contact The Law Offices of Dawn K. Gull today for a confidential consultation with a divorce attorney to learn more about how Pennsylvania divorce law handles 401Ks and other retirement assets.