Trying to divide property is one of the biggest challenges in any divorce. Spouses obviously want to keep as much of the marital estate as they can so that they can maintain a similar standard of living or rebuild their lives after the end of a marriage.
State rules require an equitable or fair division of property, but what each spouse views as fair can be vastly different. They each usually want as much of the marital estate as possible and may use various strategies to achieve that goal. One tactic commonly employed by divorcing couples is to protect specific resources by showing that they are separate property according to state statutes. Separate property belongs to just one spouse and is typically not subject to division. Frequently, retirement savings accounts are only in the name of one spouse.
Does that mean that retirement accounts are the separate property of the account holder for the purposes of property division negotiations?
Retirement accounts are often marital property
The difference between marital and separate property is more complex than people realize. It has to do with how people acquire resources and when they obtain them, not whose name is on the ownership paperwork or account. Typically, people contribute to their retirement savings accounts with every paycheck they earn.
Depending on when they started the account, all or most of the balance it contains may be subject to division when they divorce. Spouses often have to look at financial records to establish how much of the account is marital and how much is separate. They can then begin to discuss ways to divide the marital portion of the account in a fair manner.
In some cases, the spouses arranged to actually split the contents of one retirement account into two separate accounts by creating a new account in the name of the other spouse. Other times, it is possible to use the marital value of retirement savings to balance out other property division terms. It is not always necessary to directly divide a retirement savings account to fairly include it in the property division process.
Learning about the rules that govern property division can help people as they prepare for divorce. Retirement savings accounts and other high-value assets often require careful consideration to ensure a fair divorce outcome.