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Division of Marital Property: Is My 401(K) Divisible During Divorce?

Division of Marital Property: Is My 401(K) Divisible During Divorce?

When a couple divorces, their marital assets are divided. If the couple cannot agree on the division of marital assets, the court will determine the appropriate allotments. The general rule is well known and divorcing parties usually have a good understanding of the process in theory, yet there are always questions regarding specific properties and whether or not they are appropriate for inclusion in the division of marital assets. One of the most commonly argued “properties” is the 401(k).

When it comes to the court’s position, anything that was acquired with income after the date of the marriage is marital property (unless there is a prenuptial agreement in place that states differently). As retirement funds, like the 401(k), are funded with money earned during the marriage, it is considered marital property. Even if neither party has current access to the funds, they are divisible in divorce.

The first step in the division of the 401(k) as a marital asset is to determine its value. Accounts with a defined contribution plan like the 401(k) are easier to manage because plan statements provide information numerous times per year. If the plan was started prior to the wedding, the plan’s value as of that date will need to be taken into consideration. The date of separation or the date on which divorce proceedings were initiated will also need to be considered when determining value. If the retirement account in question is a defined benefit plan (i.e. a pension), the process is more complicated and will need to be discussed with an accountant.

The date when you started to invest in your retirement fund will determine how much of the total will be subject to division in divorce proceedings – the spouse may be entitled to share in all or part of the account balance. If the 401(k) existed prior to the marriage and no contributions were made post-marriage, then the account is exempt from asset division, as it would not be considered marital property. If payments were contributed to the 401(k) during the marriage, the amount contributed before the marriage and after the date of separation have to be separated from the rest (including any interest and earnings that is attributable to this portion of the 401(k)). The remaining balance is marital property and will be divisible along with the rest of the marital assets.

For more information on how the court would handle the division of a 401(k) as marital asset, please get in touch with the experienced Arizona divorce lawyers at Arizona Family Law Attorneys today.

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