Unless you have a prenuptial agreement, your spouse can claim at least part of your 401k. Without a prenuptial agreement, a court will determine how to split your retirement savings, so it’s important to be 100 percent honest about all of your assets. Judges could award a greater amount to your spouse if they learn you are hiding anything, even if it is an oversight on your part.
As with other assets, the court will decide what portion of your retirement savings qualifies as marital property. Any money added to your retirement account during your marriage years is likely to be considered marital property. That means your spouse can stake a claim to that portion.
Likewise, you may have a right to your spouse’s IRA. If you contributed to their account, you are eligible for a deduction.
Protect yourself by getting a QDRO from the court. That stands for a “Qualified Domestic Relations Order.” You can take the document to your spouse’s employer, where the retirement account administrator can transfer funds from their retirement account. Without a QDRO, your spouse could cash out their retirement account.
Taking an alternative route
You can always negotiate directly with your spouse over the division of marital property, including retirement accounts. The process has several advantages. It is less acrimonious, quicker, less costly and the proceedings are not open to the public. Any agreement is subject to the approval of a judge.
Bypassing court gives you more control over the process because you do not have to follow strict legal procedures. In a sense, you are making up your own rules. You do not have to worry about any legal “surprises” in court.
One temptation to avoid is accepting a lump sum cash payment from your spouse. Your payment can be subject to substantial financial penalties, leaving you with much less money than you thought. Unless you are desperate for immediate cash, ignore this option.
The best route to securing your future
Positive emotions were running high at the beginning of your marriage. Negative emotions are running high during a divorce. The laws and procedures are complex. You're probably getting conflicting advice from well-meaning family and friends. It’s easy to make an innocent mistake that costs you a fair settlement. Or your spouse might simply be better prepared to argue their case before a judge.
The experienced divorce lawyers at Courtney Clark Law, P.C. in Belleville, Illinois, have been handling divorce settlements just like yours for decades. We know how to cut through the legal red tape and the importance of dividing retirement savings accounts and other assets. We will work with you to design a legal strategy that secures your future. Contact us today for a free consultation.