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Is your 401(k) subject to division during a divorce?

On Behalf of | Feb 16, 2021 | Divorce |

If you are getting a divorce, one of the things you need to look at is your retirement accounts. If you have a 401(k), the likelihood is that at least a portion of that 401(k) is marital property.

If you decide to pull out money because of needing to divide the retirement account, you will have to get a court order to do so. This is called a Qualified Domestic Relations Order and confirms that your spouse has a right to their share of that money. The QDRO prevents you from having to pay early withdrawal penalties or taxes.

Do you have to divide a 401(k) in your divorce?

If you have a 401(k) that is considered to be marital property, then it will need to be split during your divorce. Alternatively, you may be able to pay out your spouse by essentially “trading” other assets for the 401(k), such as by giving them the home you own rather than a portion of the 401(k). The value of the property you give to them in exchange for the portion of the 401(k) you want to keep will need to be equal in most cases.

What kinds of retirement benefits could your spouse be entitled to?

Since New York is an equitable distribution state, the court will divide your property in the way that is fair, not in the way that is equal. If your 401(k) was largely built prior to your marriage, you may be able to receive a larger portion of it during divorce. On the other hand, if your retirement was created during your marriage, then your spouse may be entitled to half or an equal share in some cases.

What can you do to protect your retirement benefits?

If you’re worried about retaining as many of your retirement benefits as possible, you have a few options. You can collaborate with your spouse to work out a different arrangement for those assets, or you may be able to negotiate control over your retirement in exchange for other marital assets. It’s worth discussing your case with your attorney to determine how flexible it is.


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