Divorce can be one of the most financially complex experiences in a person’s life, especially when it involves dividing retirement savings and pensions that have been built up over many years. In New York, the law does not automatically split property 50/50. Instead, the state follows a system known as equitable distribution. Understanding how equitable distribution works and the effect it has on retirement accounts is crucial for anyone filing for divorce in New York. Continue reading and consult with a knowledgeable Suffolk County property distribution lawyer for more information today.
What is Equitable Distribution?
Equitable distribution is a system of dividing jointly owned assets between spouses during a divorce. This principle operates by distributing assets based on what is fair and equitable to both parties, rather than an equal split down the middle, like in a community property state.
Courts consider multiple factors such as income, earning capacity, the length of the marriage, the age and health of each party, and each spouse’s contributions to the marriage when determining what a fair division of property would be. The focus is on ensuring that both parties leave the marriage on stable financial grounds.
How Does Equitable Distribution Affect Retirement Accounts in NY?
Equitable distribution only applies to marital property, meaning assets that both spouses have a claim to. Marital property includes assets acquired by either spouse during the marriage, regardless of whose name is on the account or title. Separate property, on the other hand, includes assets obtained before marriage, inheritances, or gifts made solely to one spouse.
When it comes to retirement accounts, contributions and the growth of those contributions made during the marriage are considered marital assets and are therefore subject to equitable division. For example, if a spouse started a 401(k) before the marriage, only the portion accrued during the marriage will be distributed. Courts use financial statements and expert testimony to determine the marital portion of an account based on the increased value that occurred from the date of the marriage to the date of the divorce filing.
How Can I Protect My Retirement Savings?
It is important that you understand how to protect your financial assets during your divorce. Keep records of your pre-marital contributions and account balances to help establish the portion that is considered separate property.
Also, avoid commingling assets. Don’t mix pre-marital funds with marital contributions, as it may be harder to separate them later. Keeping separate accounts and detailed records can prevent confusion and disputes.
Depending on the circumstances of your relationship, you may also choose to specify how retirement assets will be handled through a prenuptial or postnuptial agreement. These legal documents are beneficial in minimizing disputes and providing clarity during a divorce.
A lawyer can help you structure your finances to protect your retirement savings. Reach out to a skilled attorney today.
