A 401k plan is a tax-advantaged retirement account that many employers offer their employees. Employees can sacrifice a portion of their salary to the account and employers may match the contribution or at least a percentage of it. 401ks are beneficial and help many United States citizens save for retirement. Married individuals spend time and resources to save for a joint retirement with their spouse. If they divorce it can be complex to understand how a 401k account will be split. Speak with a skilled Suffolk County property distribution lawyer to discuss how you can best protect your 401k account during your divorce.
How Are 401ks Usually Split During Divorce?
A 401k is often split between the couple during a divorce. Whether or not the account is subject to asset division will depend on several factors. New York is an equitable distribution state, meaning that during a divorce assets will be divided fairly between the parties, not necessarily an equal 50/50 split.
Before property division can occur it needs to be determined what is marital property versus separate property. Assets obtained during the marriage are typically considered marital property and are subject to division. Contributions that one spouse made to their 401k account during the marriage are likely considered marital assets. For a 401k to be split a QDRO (Qualified Domestic Relations Order) is required to outline how the account will be divided.
What Can I Do to Protect My 401k in a Divorce?
When you are getting divorced your goal is probably to retain as much of your 401k account as possible. There are ways to protect yourself and your finances during your divorce to ensure your rights are protected.
- Hire a lawyer. Acquiring help from a skilled attorney is important to ensure your rights are not being violated as they are well-versed in divorce and family law. They can help you navigate the process and negotiate a fair settlement.
- Collect and present all relevant information. You should locate and make copies of your 401k account statements, records of your contributions, communications with your employer, and communications with the financial institution your account is with.
- Be honest. Present all of the information you gathered and do not attempt to hide any information or assets. If you are dishonest you can face legal repercussions.
- Be willing to compromise. It is understandable that you want to retain the majority of your 401k account. You and your lawyer can come up with a plan of how you can keep your account by settling on other topics. Be willing to sacrifice some other assets in exchange for your account. For example, if your spouse wants to maintain ownership of a car or piece of personal property with a similar value to your 401k, offer to yield it to them in exchange for the full amount or majority of your retirement account.
- Draft and submit a QDRO to ensure the details of the division plan are followed and that you avoid tax consequences and penalties.
