How Are Retirement Accounts Divided in a Divorce?

Even when a divorce is absolutely necessary, it is often a confusing process in many ways, including financially. Determining what happens to your retirement accounts in the divorce proceedings is just one of the complex financial implications of divorce. However, if you have retirement funds, it’s crucial to understand how those accounts are handled in a divorce. The best way to ensure that they are handled correctly and that your rights aren’t being squandered is to hire an experienced Maryland divorce attorney.

Are Retirement Accounts a Marital Asset?

Many divorcing spouses aren’t aware that retirement earnings accrued during a marriage generally qualify as marital assets, meaning they can be split between the two spouses in a divorce. Retirement savings are considered marital property by Maryland law to the extent that the funds were earned over the course of the marriage. Any premarital retirement savings are regarded as separate property by Maryland law. If one spouse claims that part of their retirement account is non-marital, they must prove this fact to a family court judge.

Dividing Funds in Retirement Accounts

Dividing monies in a retirement account occurs in much the same way as the division of other assets in divorce proceedings. The spouses can agree on how to best divide it. However, suppose they can’t reach an agreement. In that case, the family court judge will divide the property through equitable distribution, per Maryland laws. The court considers many different factors when deciding which spouse gets what assets, such as:

  • Each party’s non-monetary or monetary contributions to the marriage
  • The marital estate’s total value.
  • The state of each party’s finances at the time of divorce
  • If there are fault grounds in the divorce
  • Why the parties want a divorce
  • The duration of the marriage
  • The spouse’s ages at the time of divorce
  • Each spouse’s physical and mental condition

It’s imperative to keep in mind that under equitable distribution rules, the judge will divide marital property in an equitable manner that is fair but not necessarily equal, meaning that a 401(k) or IRA earnings accrued during the course of a marriage may not be split precisely down the middle.

What Is a Qualified Domestic Relations Order?

A qualified domestic relations order (QDRO) is a method of dividing retirement assets under Maryland law. A QDRO authorizes a different payee to receive some or all of a spouse’s pension. The order enables permanent or temporary support payments to the alternate payee, an ex-spouse, spouse, or dependent of the plan holder, or otherwise divides the accumulated retirement benefits. However, a QDRO can sometimes have limitations. For instance, if the funds in a plan were already promised to another alternate payee via another QDRO, they can’t transfer to the individual requesting them.

Get Help with Your Retirement Accounts in Divorce

As you probably already know, divorce can be a daunting process with many questions for either spouse. Attempting to divide retirement accounts can raise your stress level and even have tax consequences. As such, it’s best to consult an experienced Maryland divorce attorney before proceeding.

Contact our office today.