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Equitable Distribution Lawyer – Divorce and Its Impact on Retirement Accounts

Equitable Distribution Lawyer in Charlotte, North Carolina.jpgAs we’ve discussed on the blog before, divorce does not only affect the young. Instead, the trend of baby boomers splitting continues to increase with about one in every four divorces happening with people over the age of 50. Divorce at this age presents challenged not likely to be encountered by those in their 20s and 30s.

One such issue is what happens to retirement accounts, pension plans and Social Security benefits. For many couples, retirement accounts represent a considerable chunk of their net worth, and as such, they must be addressed in divorce settlement agreements. Unfortunately, dividing retirement accounts and pension plans is a complicated process that involves tax and other financial considerations. Some of the important things to know about the process are listed below:

• Retirement funds created during the marriage are typically viewed as marital property.

Contributions to 401(k) are made via deductions from salary, pension plan benefits are a function of years on the job and salary earned, and husband and wife, regardless of whose account it is, often count on the money from both. Retirement funds added during your marriage are typically treated as marital property. However, if a spouse enters the marriage with money already in his or her 401(k), those funds are generally considered separate property, and are not included in the division of assets. It is possible that the increase in value of the separate property could be considered marital property, but that’s not always the case.

• Any retirement assets that are marital property can be divided, but the process depends on a number of factors.

When dividing 401(k) or 403(b) plans, the court must follow federal guidelines. When IRAs are involved its state law that dictates the division process. It’s important that your settlement agreement clearly explain how assets will be divided and how the funds will be transferred.


• Division of a 401(k) plan and many pension plans require a Qualified Domestic Relations Order (QDRO).

If your settlement agreement says that you will be splitting a pension or a 401(k) plan, a court must sign a Qualified Domestic Relations Order, commonly abbreviated as QDRO. A QDRO will instruct the plan administrator on how to pay the non-employee spouse’s share of the plan benefits. A QDRO allows the funds in a retirement account to be separated and withdrawn without tax penalties and deposited in the other spouse’s account.

If you find yourself facing a complicated family matter then you may need the help of an experienced divorce lawyer in Charlotte, North Carolina who can help guide you through the often confusing process. Arnold & Smith, PLLC is here to help.

See Our Related Blog Posts:

Charlotte Divorce Tips – Protecting Finances

Equitable Distribution of Marital Property