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What happens to retirement funds and 401(k) plans in a divorce?

July 11, 2017

Divorces are often complicated and have the potential to get quite messy. When children are involved, you and your spouse will be forced to try to come to an agreement over custody, child support and visitation rights. However, even if you have no children or they are grown up, you will still need to figure out how to divide your property and assets including any retirement funds or 401(k) plans that you or your spouse have. Unfortunately, figuring out exactly how retirements benefits are divided can be tricky, which is why it’s important to look at the subject in greater detail. Having a top Queens county divorce lawyer on your team can help make this process easier for you.

State Laws for Division of Property and Assets
Each state has its own specific divorce laws, which means that the way your assets are divided can vary dramatically depending on where you live. The majority of states work under the equitable distribution method, which means that your marital property and assets will be divided in whatever way that the responsible judge deems to be fair or equitable. However, this doesn’t necessarily mean the assets will be divided equally and, in fact, they almost never are.

There are also some states that operate under community property principles. In this case, all assets, property and debts that you accrued as a married couple are considered joint property and divided equally (50:50) between you and your former spouse.

All states also have laws that allow couples to reach their own divorce agreement and this agreement then takes precedent over the other divorce laws. In this way, you and your spouse can come to an agreement over how to divide all of your property or assets, including retirement funds, in a way that makes the most sense.

Dividing Retirement Funds and 401(k) Plans
The majority of couples use mediation to reach an agreement instead of letting the court decide for them how their assets should be divided. This often makes much more sense, especially when retirement funds are involved. The reason is that dividing a 401(k) or other retirement plan tends to be quite costly.

Therefore, instead of simply trying to divide these retirement funds down the middle, it is usually a much better idea to negotiate in an attempt to offset or balance the retirement funds with some other asset. In this way, you can still achieve the same desired outcome in terms of the total division of assets while also avoiding having to go through the process of splitting your 401(k). For instance, if you have other retirement accounts, bank accounts, stocks or other monetary assets, you can attempt to exchange some of these assets to ensure that you remain in sole possession of your personal retirement savings.

Just like marriage, divorce is all about compromise. The problem is that attempting to divide your assets and retirement funds in an equitable manner can be incredibly complex. For this reason, it is essential that you seek the assistance of a skilled divorce attorney to help you navigate through this most complicated time of your life.

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