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How are retirement accounts and pensions divided during divorce?

On Behalf of | Jun 14, 2024 | Divorce

Dividing retirement accounts and pensions during a divorce can be complex and emotionally charged. These assets often represent a significant portion of a couple’s financial future, making their fair division crucial. Understanding how these assets are divided can help in navigating this challenging process.

Determining marital property

It is important to identify what portion of the retirement accounts and pensions qualify as marital property. Marital property includes all assets acquired during the marriage. This means that contributions made to retirement accounts during the marriage, along with any growth in value, are typically subject to division.

Types of retirement accounts

Retirement accounts, such as 401(k)s, IRAs, and pensions, are subject to division in a divorce. The method of division depends on the type of account. For instance, a 401(k) or similar employer-sponsored plan typically requires a Qualified Domestic Relations Order (QDRO) to divide the assets. A QDRO instructs the plan administrator on how to pay the non-employee spouse their share.

Valuing pensions

Pensions can be particularly challenging to value and divide. The present value of a pension depends on several factors, including the length of service, the terms of the pension plan, and the employee’s age and life expectancy. Expert valuation makes this part of the process easier.

Be proactive

Handling the division of retirement accounts and pensions requires a clear understanding of legal and financial implications. You need to understand the specifics of your accounts to ensure a fair division of property. Proactively addressing these issues can help protect your financial future and provide clarity during the divorce process.