You know what they say; it is never too soon to start planning for your future. Never will this be more true than after you get married and it looks like you two have a whole life together ahead of you. However, not every marriage makes it to those golden retirement years. Many dissolve early through divorce. However, of the many different assets you need to divide during a divorce, the retirement accounts are not often the first thing that comes to mind. Yet, once it is decided who gets that house, the dog, and the business, the question remains – what happens to the retirement accounts?
Are Retirement Accounts Individual Property?
For anyone going through a divorce, they will soon learn that assets only need to be divided if they are part of the marital property. For example, if you purchased your house before you got married, then that house is not part of the marital property because you did not buy it while married. When it comes to retirement accounts, there are many that believe that retirement accounts are considered individual property because only one party in a marriage earned them. However, make no mistake that under Minnesota law; your spouse is owed an equitable share of your retirement assets.
Retirement Accounts Opened Before Marriage
If you started contributing to a 401(k) or any other retirement account before you were every married, this can work to your advantage, but it still does not classify the account as an individual asset. In essence, if you had the retirement account open for ten years, then got married and stayed married for eight years, your spouse will only have a right to a portion of the assets in that account that were accrued during those eight years of marriage.
This means any contributions to the account made by you or your employer during your married years will need to be split with your ex-spouse. However, contributions made during the ten years before marriage are safe as individual property. This is just one more reason to start your retirement plans early.
How Retirement Accounts Are Split
For retirement accounts started during a marriage, the division is rather simple. In most cases, the courts will deem that it should be split in half between the spouse and yourself no matter who the owner is. However, for retirement accounts started before the marriage, the equation becomes more complicated, but the split remains the same. For the funds that were contributed to the account during the marriage, they will be split in half, not the entire sum of the account itself.
However, if you are looking to keep your retirement accounts whole, you do have some options. Often the assets in a retirement account can be used as sort of a bargaining chip, though this is true of any asset. For example, if you want to keep your retirement account whole and your ex-spouse wants the house, you could negotiate so that the amount that would be owed to you from the split of the house could be taken from your spouse’s share of the retirement account. If your spouse’s share in the retirement account is $100,000 and your owed share of the house is worth $100,000, then the trade off is easy. Of course, asset division never works out quite so simply.
Are you going through a divorce in the Minneapolis area and need to make sure that your share of the assets will be fairly represented? Contact us today and let us help you get your fair share out of a divorce instead of having the headache of trying to deal with it yourself.