For many clients, the asset they wish to protect most is their retirement account. I find this to be particularly the case with clients who have municipal pensions (such as a Fireman's or Policeman's pension, which can be quite valuable). However, retirement accounts are property just like anything else, and are subject to the same rules of property distribution when going through a divorce. This means that, if your retirement account is marital, you will likely have to give a portion of it to your spouse as part of your divorce decree.
A retirement account is marital if it was opened during the marriage and has accrued during the marriage. If a retirement account is marital, the Court will likely award a percentage of it to your spouse. The amount awarded to your spouse will typically be half, but does not have to be, depending upon the different facts and circumstances of your case. A retirement account is nonmarital if it was opened and accrued prior to the marriage. Any nonmarital retirement accounts should be awarded to you as your nonmarital property, free and clear of any interest of your spouse.
What happens if part of your retirement account accrued prior to the marriage and part of it accrued during the marriage? The nonmarital portion will still be awarded to you as your nonmarital property, free and clear of any interest of your spouse. The remaining marital portion of the account will likely be divided between you and your spouse as the court deems equitable, depending on the circumstances of your case. This sounds simple enough, but depending upon the type of account, can be quite complex. Therefore, you may require an additional professional, such as an actuary, to help figure out the marital v. the nonmarital portion of a retirement account.
Even if your retirement account is marital and thus, subject to allocation at divorce, there are ways to protect your retirement account. For instance, if both parties have retirement accounts of relatively equal value, oftentimes the parties will simply agree to each keep their own retirement accounts and not take any portion of the other party's account. However, if your spouse does not have a retirement account, or your spouse's retirement is not as much as your retirement, you may still be able to keep your retirement if you have some other asset of somewhat equal value to use a bargaining chip. In other words, if there is a different type of property (such as an investment account, equity in real property, or other monetary account) that has a comparable value to your spouse's share of your retirement, and you are willing to let go of that asset, then your spouse could be awarded the other asset while you maintain your retirement free and clear from any interest of your spouse. If you are getting a divorce and have questions about your retirement, feel free to contact our office today for your free consultation!