Do I Have to Share My Retirement Savings or Pension With My Ex-Spouse?
The process of divorce can be long and difficult, and there are numerous concerns that must be addressed before the legal dissolution of a marriage can be finalized. Issues that affect your family’s finances are often among the most complex and difficult aspects of a divorce. As you make decisions about how to divide the property you own with your spouse, you will likely be considering how to make sure you will be able to address your immediate needs and the financial concerns that may affect you in the near future. However, it is also a good idea to be aware of the impact that your decisions will have on your long-term financial health, including the resources that will be available to you after your retirement. By understanding how money in retirement accounts or pension benefits that you or your spouse have earned will be addressed during your divorce, you can make sure you will be fully prepared for the future.
The Basics of Retirement Savings & Pensions in Divorce
In a divorce, retirement savings and pensions are considered marital property. Regardless of who earned these benefits or whose name is on a retirement account, assets earned during your marriage are the property of both spouses. Marital property will be divided between you and your spouse based on what is considered to be equitable under New York law. While a retirement account such as a 401(k) or IRA will not necessarily need to be split in half, the funds in an account may be divided based on the applicable factors in your case, which may include the amount of other marital assets each spouse will receive, the needs of each spouse, the financial circumstances each spouse is likely to encounter in the future, the tax consequences of allocating different assets to either spouse, and other relevant concerns.
Pension benefits earned by either spouse will also need to be considered when dividing marital property. Even though you or your spouse may not plan to retire in the near future, pension benefits that are fully or partially based on work performed during your marriage will be considered a marital asset. Determining the actual value of these assets and the amount of the pension benefits that the other spouse will be entitled to receive is not always easy, especially if the salary a spouse will earn at the time of their future retirement is unknown at the time of divorce. In some cases, you may agree that one of you will receive a percentage of the other spouse’s future pension benefits, or the non-pension-holder may give up their right to share pension benefits in return for maintaining ownership of other marital assets.
Using a QDRO to Divide Retirement Assets
When dividing retirement accounts or pensions during a New York divorce, you will usually need to use a Qualified Domestic Relations Order (QDRO). This is an order issued by the court that directs a plan administrator to distribute a certain amount of the funds in a retirement account to someone other than the account holder. A QDRO may also be used to divide pension benefits, and it will direct the pension plan administrator to allocate pension benefits to an alternate payee. A QDRO will allow for funds in retirement accounts and benefits paid through pension plans to be divided between you and your spouse without incurring any taxes or penalties. With the help of experienced legal counsel, you can make sure that all information included in your QDRO is correct so that these assets will be divided without causing any complications in the future.
Contact Our Rockland County Retirement Account and Pension Division Attorney
Divorces often involve complex financial considerations—including those related to retirement savings and pensions—and it is important to understand how these types of marital assets should be addressed according to state laws and regulations. To protect yourself financially, we recommend working with the experienced Hudson Valley property division lawyer at the Law Offices of Robert S. Lewis, P.C. who can help guide you through this process while ensuring that your rights are protected at all times. To set up your free consultation, contact our office at 845-358-7100.
Sources:
https://ww2.nycourts.gov/divorce/info_faqs.shtml#What%20is%20the%20Equitable%20Distribution%20Law?
https://www.nysenate.gov/legislation/laws/DOM/236
https://www.investopedia.com/personal-finance/whats-qdro/
