Division of property can be one of the most complicated elements of any divorce. Spouses frequently disagree about what is fair and appropriate.
Retirement savings are often among the most valuable personal holdings accumulated during marriage. They may also be a source of pride and comfort for those concerned about their financial stability during retirement. Some spouses have joint accounts that they own and fund together. Many others have separate retirement accounts related to their employment.
For those with individual retirement accounts, can they retain those accounts as separate property when they divorce?
Marital assets are subject to division
Typically, retirement savings are at least partially marital property. Spouses use income earned during the marriage to fund the account. Even if they began saving before getting married, any amounts contributed during the marriage are likely marital property that the spouses need to report and account for during the divorce.
The account being in the name of one spouse does not make the funds within the account their separate property. The courts look at the timing of contributions and the nature of the money used to fund the account. If people deposited marital income into a retirement account held solely in their name, then they need to address those contributions if they divorce.
Couples do have the option of allowing each spouse to retain their own retirement savings accounts. Even if only one spouse has funded an account, they could ask to keep it during the divorce. They simply have to balance the retention of the account by making adjustments to other aspects of property division.
Allowing the other spouse to retain valuable assets can help balance the ledger if one spouse retains a retirement savings account in its entirety. Assuming responsibility for marital debt can also play a role in achieving an equitable solution. In the event that spouses do not reach a settlement, a judge may decide how to address retirement accounts as part of the overall property division process.
Professionals who have saved for retirement often need to share at least a portion of their savings with their spouses when they divorce. Learning more about the rules that apply to property division during a divorce can help people identify what resources they can protect and negotiate with clear goals in mind.