When may a retirement plan become marital property?
On Behalf of Patrick M. Noe, Jr., Attorney at Law | Apr 5, 2022 | Property Division
Retirement plans started after your wedding become part of your marital estate even when only one spouse funded the account. According to the New York State Senate website, marital property consists of assets acquired during a marriage, which could include retirement plans.
If an employer offers a spouse a pension or 401(k) plan, the contributions classify as marital property. Both spouses have a right to a fair portion of the fund's market value. A fund's value at the time of your divorce may require dividing. An outcome may reflect how well you and your soon-to-be ex-spouse negotiate a fair settlement.
How may I negotiate dividing a 401(k) plan?
A divorce generally does not require liquidating a 401(k) plan. As reported by SmartAsset, a judge must approve a Qualified Domestic Relations Order. Before obtaining an order to divide an account, spouses may discuss how much of its value would be a fair distribution.
New York follows an equitable distribution system when splitting assets in a divorce. A 401(k) division may compel a judge to review each spouse's financial status. Your marriage's duration and your other assets may factor into how much a spouse may request.
How may a spouse receive funds from a retirement plan?
After valuing the fund and negotiating a fair division, a spouse may receive money from a retirement plan. A one-time cash payment could, however, result in an early withdrawal penalty and tax liability before the age of 59½.
A spouse may receive a portion of the funds without penalties through a direct transfer into his or her separate qualified retirement fund. A third option is for a spouse to receive future distributions when the account owner reaches retirement age.
Assets acquired after your wedding date generally classify as marital property. An effective negotiation may, however, result in a mutually agreeable divorce settlement.