Do You Have to Split Your Retirement With Your Spouse in A Divorce?

You worked like a dog during your marriage, and built up a nice retirement fund. Is your spouse legally entitled to any of it when you get divorced?

When you’re married, and you and your spouse are working as a team, you don’t think much of the sacrifices you’re making - working long hours, setting aside a portion of paycheck each week - to make sure that you two have a little nest egg for your golden years - it’s romantic.

But then the team falls apart.

For whatever reason, trust is lost and the partnership breaks. The future - 20, 30 years down the road - looks a lot different now. When the team was together, you shared expenses - most importantly the biggest expense - your house. Not any more. Your total expenses are going to increase but you still only have one retirement fund.

You don’t have to share it do you? Well, my friend, you probably do. 

Let’s do a quick overview of the property division rules for a divorce.

When you get divorced, all the property that you and your spouse own is classified into three categories: your non-marital property, your spouse’s non-marital property, and marital property. Marital means “of the marriage.” So, what happens in a divorce is you take your non-marital property, your spouse takes their non-marital property, and the marital property is divided. The law says that it should be divided equitably. In practical terms, equitably means, in 99% of cases, either a 50-50 split or something like a 60-40 split.

So what’s non-marital property then? You know the stuff I get to keep for sure?? Wouldn’t my retirement fund be non-marital? It’s in your name, you worked for it, your employer did most of the contributing actually, it didn’t even show up in your paycheck… None of that matters.

Generally speaking, non-marital property is property is limited to property that you had before the marriage.

On the other hand, most of the property that you got during the marriage is marital. That includes contributions to your retirement fund. But what about contributions that were made before the marriage? Well, those are considered non-marital. So, really, if you started contributing to retirement account before the marriage and continued to do so during the marriage - it’s both marital and non-marital.

If the case went before a judge, they would award you the non-marital portion and they would split the marital portion. The methods on calculating the marital and non-marital portions can get a bit more technical – let’s not go there right now.

So how do you actually split a retirement? You know, in practical terms?

It’s not as easy as just withdrawing cash from a checking account, is it?

No, it’s not.

There are two basic ways that the value of a retirement account is split. 

Splitting Your Retirement Account with An Offset

If you and your spouse have other property you might negotiate an offset. For example, if your house has equity, you and your spouse could decide that you will keep your retirement account in its entirety and your spouse will keep the house. If an offset isn’t in the cards, the other option is called a QDRO or qualified domestic relations order. 

Splitting Your Retirement Account with a QDRO

A QDRO is a special kind of order that the judge signs and you send to your retirement account administrator. It directs the administrator to divide the account by whatever instructions are laid out in the QDRO. The administrator then reaches out to your spouse in order to set up a separate retirement account. QDRO’s and retirement account division can get extremely technical.

Honestly, it would be silly to try to handle a retirement division without a lawyer. 

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