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  5. What Happens to My 401K During Divorce?

What Happens to My 401K During Divorce?

On Behalf of Lisa D. Stern | Sep 24, 2020 | Divorce |

The dividing of retirement accounts can be one of the most complicated parts of the entire process. Many people do not realize it, but your retirement account is often your most valuable asset. If you’ve worked for a long time contributing to a 401k, IRA or pension plan, chances are these accounts have significant value.

There are also several unique rules and laws that apply to these types of accounts, making them more complex to handle during divorce. So, what exactly is going to happen to your 401k, IRA or pension after your divorce?

How Are These Divided?

Like most other states, Michigan is an equitable distribution state. This means that, since retirement accounts including 401ks and other retirement assets are considered marital property, they are divided equitably during divorce. Equitably rather than equally does not mean 50/50 in all cases.

The other terms of your divorce settlement will likely determine how much of your retirement account your spouse is entitled to including:

  • Tax brackets and income taxes
  • Other savings accounts
  • Specifics outlined in divorce settlement (i.e. who keeps the house or other assets)
  • Stocks
  • Other payouts

These considerations all factor into the final amount your ex will get from your retirement accounts.

Other Considerations

Another aspect of this process is the Qualified Domestic Relations Order or QDRO. This document is required for dividing certain types of retirement accounts, including 401ks. The document outlines how the account’s owner plans on paying the non-employee spouse their portion of the benefits and is necessary for this part of the process.

It’s easy to see that retirement accounts are often a complex and difficult asset to handle during divorce. An experienced divorce attorney can tell you more about your specific situation and how this part of the process will be handled based on your circumstances.

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