What Happens to My Retirement Accounts in a Divorce?

What Happens to My Retirement Accounts in a Divorce?

You have worked your whole life to provide for your family. Looking into retirement, you planned well, ensuring that your golden years would be filled with travel, hobbies, and one good time after another. But there has been a glitch in your plans — divorce. You know you are going to have to part with assets and work out some uncomfortable issues, but when it comes to retirement funds—are not those your hard-earned money? Why should you have to give half of that to your spouse? 

The Reality

The truth is, under Michigan law, when a couple divorces, all marital assets must be equitably (not necessarily equally) distributed. And while there are many different kinds of retirement accounts, they are all, indeed, assets if the contributions occurred during the course of the marriage. (Prenuptial contributions will likely remain your sole property). The key situations that ensure against such a split include when you have signed a pre-or post-nuptial agreement excluding retirement funds from divorce negotiations or when both partners have their own retirement plans and do not wish to divide them.

Qualified Domestic Relations Orders

Because there are many complications in dividing these kinds of accounts, you may need to have a Qualified Domestic Relations Order (QDRO) to protect your investment. It is generally necessary when certain types of accounts are going to be divided. An IRA, for example, is a pretty simple split and will not require much more than notifying the manager of the split. When it comes to 401(k) accounts, however, a QDRO allows only one transfer of assets before taxes and penalties become substantial. Guaranteed pensions are a bit different, and a QDRO lays out the manner in which the benefits will be divided once the distributions start.

Is There Any Way to Keep My Retirement?

Again, your retirement plan is part of the larger package of assets that must be divided in a divorce.   In some situations, individuals may choose to trade their share of the retirement package for something of equal value. Maybe one spouse gets the house, the other the pension or 401(k). But be sure to look at more than just the face value of any asset, as tax implications could make a huge difference in the ultimate value.

An Experienced Divorce Attorney is a Must

In any divorce the complications that arise can make plans go south unexpectedly. That is why it is critical that you have an experienced attorney who understands your goals fighting for the best possible outcomes for you. At Lucido & Manzella, P.C., our determined and aggressive divorce attorneys listen and pursue your goals with vigor. To discuss your situation, schedule a no-cost, confidential consultation in our Clinton Township office today.