You Get The China, I Get The Tools. Who Gets The Retirement Account

A divorce can be expensive, both financially and emotionally. Dividing assets collected over years of marriage often is the most challenging part. The procedures for splitting checking accounts, and savings accounts, are thorough and laid out with all the fine print. What about retirement savings? That depends and a couple should get educated on dividing retirement accounts when divorcing.

As Forbest points out, governing bodies at different levels — state, federal & local — treat property different. Some states demand equal distribution laws. In these states, the court reviews each spouse’s financial situation and their ability to earn an income. Then a division, fair to each party, is determined.

New York is an equal distribution state meaning if just one spouse’s name appears on the title, that person acquired the property. When a pair separates, the judge must split marital assets equitably, and impartially. This doesn’t inevitably demand an equitable split of the assets.

Community property states declare that all assets obtained during marriage are jointly owned, regardless of who purchased them.

Circumstances, such as a prenuptial agreement, may create exceptions, but it is still a good idea to talk to a divorce lawyer experienced with New York State divorce laws.


Retirement savings distribution can be received if they are rolled into an existing retirement plan. There are three ways a divorcing individual can make happen, and a qualified attorney should be consulted for the details of accomplishing this. The three methods are:

  • Request a direct transfer
  • Defer taking distribution
  • Cash out a portion of the balance

Regardless of the manner chosen, beneficiaries will need to be updated and tax implications examined.

Tax Implications

Various types of retirement accounts come with varying tax consequences. 401(k)s have a different impact than a 403(b) which is also different than traditional IRAs pre-tax schemes. A careful selection, under the watchful eye of your attorney, will still come with its results when splitting retirement savings.

If you and your soon-to-be-ex can work together, think about working out the details beforehand to save time, money and frustration. Be sure to maintain precise and detailed ledgers of the process — you may have to document your agreement to the courts later in the divorce procedures.

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