Retirement Counts: Retirement Accounts and Divorce

Work hard, play hard. I often wonder if the play hard part comes easier later in life, maybe in the retirement phase. In any event, working hard to retire strong is a goal most of us have in common.

In divorce, I often find clients surprised to realize that retirement accounts are, generally, subject to division.

So, here is another rule of family law: retirement accounts that accrue during the marriage, as a general rule, are marital property. As a result, during divorce, the retirement account is considered a marital asset and apportioned between the parties along with the rest of the marital estate.

What happens if the retirement account began to accrue prior to the date of marriage? Well, as a general rule, the portion that accrued prior to the date of marriage is considered non-marital property and not divided between the parties to the divorce action. However, if contributions were made to the retirement account during the marriage, then those portions are considered marital and subject to equitable distribution. And, if the non-contributing spouse can show that the intent of the contributing spouse was to make all funds of the retirement account marital, i.e. placing the account in both spouses’ names and withdrawing funds from the account to contribute to the purchasing of marital property, then there is an argument to be made that the entire retirement account is marital property.

How is a value placed on the retirement account for purposes of division in divorce? Again, in general, if the retirement account is marital, the court looks to the value of the retirement account at the time of the filing of the family court action and then deducts the contributions the spouse made during the pendency of the marital litigation and adds passive income, such as interest. Where only a portion of the retirement account is considered marital, the values of the account at the date of marriage and at the date of filing are key in determining the marital portion that is subject for division. However, it is not as easy of an equation, and, depending on the size of the retirement account, an expert may be hired to help determine the marital portion value.