Divorce is never easy. Along with the emotional and financial assets that you may lose, you also have to consider the dynamics of children and pets. However, you, along with your ex-spouse, must decide how you will divide up your assets, and that includes retirement accounts such as your 401(k). It can be a challenge for both parties to agree on a solution that works. In addition, you also must consider how to diminish taxes, or you stand to lose even more of your savings to the government.
This discussion examines what usually occurs to 401(k) benefits during a divorce and what measures you can take to possess as much of your savings as possible.
Financial Steps to Consider before Divorce
Before you think about the divorce declaration, you may want to meet with one of these professionals:
- Social Security benefits plan administrator
- Pension plan administrator
- Retirement and savings plan financial advisor
To review your:
- Roth IRA and individual retirement account
- Life insurance policies
- Credit cards and debt
- Retirement income
- Court orders related to a former spouse or child support
- Legal documents such as wills and prenuptial agreements
Obtaining most of this data is free. A divorce lawyer can also examine your retirement planning and provide you legal advice on your retirement account balances and the divorce settlement.
How Are 401(k)s Divided during a Divorce?
The way the divorcing couples divide 401(k)s is contingent on a number of factors such as where they live, the balance of each 401(k), how the government taxes the 401(k), and the amount of other marital possessions.
Typically, many states utilize marital property law, which demands that marital property be split fairly, although not always equally. Community property states entail that all marital assets be split evenly in a divorce. The chief component is marital assets. In both cases, the money that invested into your 401(k) before your marriage is not deemed marital or community property and is not subject to be divided in a divorce.
A court can order a spouse with considerably more savings than the other to give more in settlement; however, that does not translate into you having to liquidate your 401(k) and giving some of it to your former partner.
Safeguarding your 401(k) in a New Jersey divorce is feasible if you can show it is not a marital asset that relates to an equitable split or if you offer to make other compromises to counteract the value of the account that your former partner would otherwise be permitted to acquire.
Can You Protect Your 401(k) in a Divorce?
There are avenues that you can take to keep as much of your 401(k) during divorce proceedings. Among your options are possibly selling your home, your proximity to Social Security, collecting evidence that will allow you keep more money, and adjusting your lifestyle to put more money back into your 401(k).
During the negotiation phase, you could suggest something else to your former partner other than funds from your 401(k), and although you cannot stop your ex-spouse from getting some of your 401(k), you can make alterations to put money back into the account once the divorce is finalized.
Marlton Divorce Lawyers at Burnham Douglass Can Help You Protect Your 401(k)
If you are amid the process of getting a divorce and are concerned about securing your 401(k), there are options available to you. The Marlton divorce lawyers at Burnham Douglass are well versed in how to best protect your 401(k) during a divorce and help you receive a fair and just settlement in the process of negotiations. Contact us online or call us at 856-751-5505 for a free consultation. We are located in Marlton and Northfield, New Jersey, and we serve clients throughout South Jersey, including Camden County, Burlington County, Atlantic County, Gloucester County, and Mercer County.