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Safeguarding your retirement accounts during the divorce process

On Behalf of | Jun 2, 2023 | Family Law |

Sometimes, married couples in New Jersey have no choice but to call it quits and get divorced. During this time, each party in a divorce has assets they want to protect. Some of these valuable assets could be your retirement accounts, such as IRAs and 401(k)s.

Determining the date of your contributions

A major factor regarding the division of any retirement account is whether they’re marital or separate property. With New Jersey being an equitable division state, local courts must divide marital property fairly. If you contributed to your retirement accounts while married, a court would likely deem these contributions as marital property. Contributions made to these accounts before marriage are separate property.

Protecting your 401(k) accounts

In family law situations involving divorces, many adults want to protect the considerable money inside their 401(k) accounts. You will more than likely keep what you contributed before the marriage and split the remaining funds. However, in some cases, divorcing couples with equal amounts in their 401(k) accounts can agree to retain their individual accounts.

Safeguarding your individual retirement accounts (IRAs)

Unlike splitting a 401(k) account, there’s no requirement for a qualified domestic relations order (QDRO) to split IRA accounts. Typically, the court treats IRAs as marital property if the owner opened this account while married. The difference with these retirement accounts is that courts allow divorcing couples to split IRAs tax-free within one year of their divorce finalization.

Protecting pensions

New Jersey treats pension assets as marital property. The caveat here is that the account owner keeps pre-marriage contributions. If you and your employer made significant pre-marriage contributions, the court can’t split these funds with your ex-spouse.

The divorce process can be confusing. Understanding how courts distribute retirement accounts helps you avoid dealing with any unexpected surprises.