Dividing Retirement Accounts in a Divorce

Instead of looking backward at what ended the marital relationship, you should use the divorce process to put yourself in best possible position for the future. The terms of your divorce order could have a major effect on your well-being for many years to come, maybe even decades from now. Though you might be a long way from retirement, pension benefits, 401(k) accounts and other funds that accumulated during the course of your marriage might be among the most significant divisible assets in your divorce.

North Carolina is an equitable distribution state, meaning that when a settlement on the allocation of marital property cannot be agreed upon by the parties, the judge will divide assets and debts based on what they think is fair. The spouses do not have to receive equal value. When it comes to retirement accounts, the amount accrued during the marriage is considered marital property and is subject to division. Any contributions made before the couple wed or after they separated are usually considered separate property and stay with the individual spouse.

Different types of retirement accounts are subject to specific rules when it comes to division. Your divorce might involve one or more of the following:

• Employer-sponsored 401(k) plans — Many workers take advantage of the benefits associated with 401(k) plans, but early withdrawals can result in serious taxes and penalties. Under a Qualified Domestic Relations Order (QDRO), spouses going their separate ways can maintain access to their share of the account. Then they can retrieve the funds once they become eligible to do so without being penalized.
• Pensions — You could also utilize a QDRO to separate the pension benefits collected by one spouse while the couple was wed. Depending on the particular circumstances, an expert might be brought in to determine the precise value of the divisible benefits.
• Individual Retirement Accounts (IRAs) — An IRA can be divided without a QDRO, but it’s essential to follow the proper procedures to avoid penalties or tax consequences. The court will determine the marital portion of the IRA and order a transfer of funds to the other spouse’s IRA or other retirement account.
• Military and government pensions — Special rules apply to the division of military and government pensions. The Uniformed Services Former Spouses’ Protection Act (USFSPA) governs the division of military retirement benefits, while federal laws oversee government pensions. In these cases, it’s crucial to work with a divorce attorney familiar with the pertinent regulations.

When dividing retirement accounts in a North Carolina divorce, the court considers several factors to determine what constitutes a fair distribution. These factors may include the length of the marriage, the spouses’ earning ability and each party’s contributions to the marriage.

Dividing retirement accounts in a North Carolina divorce requires careful attention to detail and a thorough understanding of the law. The process often involves complex calculations and valuations, particularly when dealing with different types of retirement accounts. At The Moore Law Office, PLLC in Asheville, we will see that your interests are protected and will work to secure your fair share of the retirement assets and other marital property. Contact us by calling 828-258-8053 or use our online form to set an initial consultation.