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Is a retirement savings account separate property in a divorce?

On Behalf of | Apr 9, 2024 | Divorce |

Higher-value assets often become focal points during contested divorces. Spouses fight over how they share their property and sometimes over what assets they have to divide with each other. Retirement accounts may be worth hundreds of thousands of dollars, especially if someone earns a competitive wage and started the account years ago.

Most people preparing for divorce may hope to keep as much of their retirement savings as possible after the divorce. If someone has a retirement account held only in their own name related to their employment, can they treat that account as separate property during divorce negotiations?

Retirement savings are often marital property

Certain types of assets are separate property for the purposes of asset division during a divorce. Assets that people owned before they got married might be separate property. Assets that people protected with marital agreements can also be separate property.

Sometimes, spouses did agree to treat retirement savings as separate assets for the purposes of a divorce. Sometimes set aside 401(k)s and similar accounts as the separate property of each spouse should the marriage end in divorce. Without a written agreement declaring as much, simply holding the account in one name and starting it before marriage is not an adequate reason to claim it as separate property during a divorce.

The owner of the account likely made contributions throughout the marriage using marital income to fund the retirement account. Therefore, those deposits are part of the marital state. A portion of the account may be separate property, but any contributions added during the marriage are likely subject to division. Spouses have to disclose accounts even if their spouses never contributed to them and may need to divide them as part of the divorce process.

Thankfully, there are ways to protect retirement savings during divorce. Spouses can potentially negotiate settlements in which they do not divide their retirement accounts. People could seek to uphold marital agreements or establish a sizable portion of the retirement account as separate property by calculating the value of the deposits made during the marriage.

Learning more about the rules that apply during property division proceedings may help people prepare for divorce and life after divorce. Those who understand what assets they must divide can potentially set more realistic goals for their divorce proceedings.