How Is My 401(k) Split In Divorce?
Going through divorce is difficult enough, emotionally, without also having to worry about every little detail of the financial side as well. We’ve previously discussed some of the important financial issues to cover when it comes to marriage and divorce—equitable distribution (in general), prenups, the most important financial mistakes to avoid, etc. Below, we discuss how 401(k) assets, in particular, are handled.
How Equitable Distribution Works
Florida, like a number of other states, follows the principles of “equitable distribution.” In a nutshell, this means that the court begins with the premise that the distribution of assets should be equal unless there is justification for unequal distribution based on a number of factors, such as the economic circumstances of the parties, the contribution each spouse made to the marriage, the duration of the marriage, any interruption in education and/or careers for either spouse, etc. In other words, the judge is going to do what he or she thinks is “fair,” and that isn’t always going to be a 50/50 split.This same principle applies to 401(k) plans.
Separate Versus Marital Property
First and foremost, the split is based on separate versus marital property. Anything owned individually that was not contributed to via marital funds is typically considered separate property, including inheritance. Anything contributed to and/or made during the marriage is considered to be marital funds, and this also applies to 401(k) plans.
Most Importantly, Become an Expert on the Plan Itself
Keep in mind, however, that you and your ex are also free to negotiate and decide, for yourselves, how you want to split up the 401(k) funds. Just make sure that you work with experienced divorce attorneys to ensure that your settlement agreement reflects how, exactly, this is going to be done.
In addition, perhaps most importantly, you and your attorney need to be fully aware of how the particular 401(k) plan works. Although plan administrators must comply with the Employee Retirement Income Security Act, the administrators can decide how they want to split the funds and when distributions can be taken. Therefore, the first step—before any negotiations take place—should be a thorough review of the plan’s rules.
Qualified Domestic Relations Orders
Finally, in order for the 401(k) plan administrator to be put on notice of how these funds are going to be split, your attorney will need to draft and submit a Qualified Domestic Relations Order (QDRO) to the court. Once signed, it must then be approved by the 401(k) plan administrator.
Contact Our Florida Divorce Attorneys with Any Questions
Regardless of what you envision for your 401(k) funds, you need to have strong, knowledgeable representation during your divorce in order to make sure that everything proceeds correctly and in accordance with the law. Contact our experienced divorce lawyers at Trachman & Ballot-Lena, P.A. today to find out more.