Divorce is financially and emotionally challenging. You and your ex will have to decide who will provide care for your children, how your assets will be divided, and how to split 401Ks or IRAs. If you’re a Connecticut resident, here are some things you should know about divorce and your retirement accounts.
Dividing 401Ks in a divorce
The way you and your spouse divide a 401K will depend on where you live, the balance of the retirement account, and tax regulations. The value of the rest of your marital assets will also be taken into consideration.
In most states, marital property law is in effect, which means that marital property will be divided fairly but not necessarily equally during a divorce. In a community property state, the marital assets will be divided 50/50. Any funds you deposited into your retirement account before getting married will not be subject to division in your divorce.
If one spouse has substantially more savings, the court will sometimes order the spouse with more savings to share some of the funds with the other spouse. However, this doesn’t mean that the higher-earning spouse has to liquidate their retirement account.
Before you decide the best way to split your assets, you should know how much you have. This means assessing your valuable items and debts. Be sure to get summary plan descriptions of your retirement accounts. Contact your retirement plan administrator to make sure you’re familiar with the rules associated with the account.
Submit any information about your assets and accounts to the divorce attorneys for both parties. These documents are necessary to create an agreement that is acceptable to the retirement plan administrator. If the plan is rejected, you’ll need the documents to draft a new plan.