Dividing Retirement Assets in a New Jersey Divorce
If you are considering or are in the process of divorce, you may be concerned about how you and your spouse’s various retirement accounts will be divided. Dividing retirement assets in a New Jersey divorce can be a complicated process that often requires the assistance of legal counsel.
An experienced property division lawyer can help you identify retirement assets and explain your legal rights to them under New Jersey divorce law. One of our skilled attorneys can advocate for you during negotiations with your former spouse and their attorney and represent your interests during court proceedings.
Marital Property in New Jersey
In a divorce proceeding, under New Jersey Revised Statutes 2A:34-23.1, the court will start with the rebuttable presumption that each spouse worked to acquire property for the marriage during the union. This includes both income-producing work and homemaking. Therefore, the court will likely consider retirement assets earned during the marriage marital property, regardless of which spouse owns the retirement account.
A seasoned divorce attorney can help identify marital assets, including retirement accounts, and explain if they are considered marital property in your case.
Retirement Assets in New Jersey
Indeed, retirement assets, if they are acquired during the marriage, are generally considered to be marital property and subject to “equitable distribution” in the event of a divorce.
Equitable distribution is the way in which the court will divide marital property upon dissolution of the union. According to state law, the court will consider a number of factors when making this decision, including the health and financial status of each spouse, their contributions to marital assets during the marriage, their ability to earn money into the future, and their future income needs.
It is generally more expensive for a single person to retire than a couple. Many couples embark in marriage and contribute a substantial amount of income into various retirement assets, including 401(k)s, IRAs, and other investments. Others purchase life insurance plans and most consider Social Security as well.
Under equitable distribution, most of these assets, if they were acquired during the marriage, will be distributed between the spouses in a divorce. However, distributing these assets during a divorce may become complicated, especially if the retirement benefits are not yet being paid out.
There are certain solutions to the problem of dividing retirement assets in a New Jersey divorce. One way is to give the retirement account to one spouse in exchange for another that is worth a similar amount, rather than attempting a split.
Alternatively, divorcing spouses can delay the distribution of the retirement account until it can be legally paid out, for example, when one spouse reaches retirement age. At that point, the former spouses can share in the proceeds. This option may require an additional court order called a Qualified Domestic Relations Order (QDRO) that is written specifically for the retirement plan.
Tax Implications
Divorcing couples in New Jersey who are splitting up retirement accounts should be aware that there may be tax implications. In certain scenarios, if spouses split an account, one individual may be assessed additional taxes and penalties for withdrawing the money too early. An asset distribution lawyer and/or a tax professional can help ensure that the transfer is made without triggering additional taxes.
Beneficiary Designations
Those who are divorcing and dividing retirement assets in New Jersey should also be sure to make or change their beneficiary designations on their retirement accounts. Many people designate their spouse as the beneficiary on their retirement accounts or life insurance or other policies; however, in the event of a divorce or other life events, account holders may want to review these designations and update them as necessary.
Call a Skilled NJ Divorce Attorney about Dividing Retirement Assets in Your Divorce
You may be faced with a number of complex financial factors if you are considering a divorce. Dividing retirement assets in a New Jersey divorce might seem like a daunting task, but it can be simplified with a lawyer’s help.
An experienced divorce attorney can help you understand how New Jersey law affects the division of your retirement accounts. Call today to schedule a consultation and learn more.
