Divorce often raises complex financial questions, especially when it comes to retirement accounts that are not yet accessible. Many people assume that their 401(k), pension, or IRA will remain only for them, but that is not always the case in New Jersey. Because NJ follows an equitable distribution system, your spouse may be entitled to a portion of your retirement savings even after your divorce. Read on and consult with an experienced Mountainside property distribution attorney to secure skilled representation.
What is Equitable Distribution?
New Jersey is an equitable distribution state, meaning that marital property is divided fairly, not necessarily using a 50/50 equal split. The goal is fairness based on each spouse’s financial situation, contributions to the marriage, and future needs.
When determining equitable distribution, courts will consider the following factors.
- The length of the marriage
- The age and health of each party
- The income or property brought to the marriage by each party
- The standard of living established during the marriage
- Prenuptial agreements concerning property distribution
- The income and earning capacity of each party
- The contribution of each party to the other’s education, training, or earning power
- The tax implications of the proposed distribution to each party
- The present value of the property involved
- The needs of a parent who has primary custody of shared children
- The debts and liabilities of each party
Courts can examine the above and more to determine a fair split of assets and debts that will not leave one spouse significantly disadvantaged.
Is My Spouse Entitled to My Retirement Savings During an NJ Divorce?
Yes, a New Jersey court can award your spouse a share of your employer-sponsored or individual retirement account. Retirement savings are generally considered marital property in NJ, given that they were earned or contributed during the marriage. Contributions made before the marriage or after separation, however, can be considered separate property.
During the discovery process, where you and your spouse share financial information, the court will require both of you to disclose any retirement benefits that you have earned. The court will determine which portion of your retirement account is subject to equitable distribution.
How Are Retirement Accounts Divided During Divorce?
Courts determine the portion of retirement savings that are jointly owned by calculating contributions and earnings accumulated during the marriage. Economic experts can assist with these calculations.
To actually receive a share of the retirement account, the receiving spouse must obtain a QDRO (qualified domestic relations order). A QDRO is required to divide certain employer-sponsored plans, like 401(k)s and pensions. It is a court order that explains exactly what is expected in terms of dividing retirement benefits and instructs administrators to transfer funds. This helps protect retirement savings from tax penalties for early withdrawal.
This process can be complex, so it is highly recommended that you secure the help of a skilled legal professional. Reach out to an experienced divorce lawyer today for more information.
