Along with the marital home, retirement accounts are some of the largest assets many American couples must divide during divorce. So, who gets your or your spouse's retirement funds? This can be a very tricky subject, and a lot is at stake. Here are five key factors that could impact it.
1. Common Law and Community Property
Each state sets its own rules as to who owns marital property. In general, common law states assign ownership to whoever is on the title, deed, or account. Community property states divide up marital assets evenly between the two spouses. Therefore, how much legal right you or your spouse has to accounts depends on which approach your state takes.
2. The Timing of Opening the Account
When was each retirement account opened? In both common law and community property states, assets brought into the marriage are likely to be considered individual—not marital—property. Because many retirement accounts are often years (or even decades) old, they could meet the criteria for individual assets provided they were not mingled with others.
3. How Much Growth the Account Has Had
Whether or not the account itself pre-dated the marriage, both parties may have a legal right to gains made during the marriage. This would often include both dividend and interest growth as well as contributions made during the marriage. Your team would separate amounts contributed before you became spouses and what was contributed afterward, calculating the growth in value for each.
4. Who Contributed to the Account
In those common law states, the name on the account may not be the end of the matter. It's not uncommon for both spouses to contribute to a single retirement account or to contribute to their partner's account. If you demonstrate that you contributed to your spouse's funds, this may be enough to argue for a more equitable division of that asset.
5. What Else Both Parties Want or Get
The point of most divorce negotiations is to reach an agreement that's equitable to both sides. Retirement accounts could be valuable leverage to achieve your goals. Want to keep the marital home, your vacation rental, or access to your ex's pension? Then giving up a retirement income source could make it work. Or, you might negotiate for the opposite.
Where Should You Start?
Find out more about how your particular retirement funds will fare in divorce negotiations per your state rules. Meet with a divorce attorney today to get started.