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When a couple decides to divorce, some of the most valuable assets that they may own are retirement accounts. Retirement accounts – such as 401(k)s, pensions, IRAs, and other retirement funds – are often accumulated during the course of the marriage, and how these assets are divided can significantly affect both parties’ financial future. It’s essential for divorcing spouses to understand the key factors that influence how retirement assets are divided, as well as the specific procedures required to ensure that the division is carried out fairly.
Yes. In Maryland, retirement assets accumulated during the marriage are considered “marital property” just the same as real estate, bank accounts and other property. Maryland is an “equitable distribution” state, meaning that in the event of a divorce, marital property is divided in a way that is fair, but not necessarily equal. Retirement accounts, like any other asset acquired during the marriage, are typically considered marital property. This means that contributions made to retirement funds during the marriage are generally subject to division, regardless of whose name is on the account.
However, it is important to note that retirement contributions made prior to the marriage are not considered marital property and may be excluded from division as part of the divorce. For example, if a spouse enters into the marriage with $20,000 in their 401(k) plan and has $100,000 in their 401(k) plan on the date of divorce, only the $80,000 accrued in the 401(k) during the course of the marriage would be subject to division as part of the divorce. It is extremely important to consider whether any portion of your retirement is “non-marital” or otherwise excluded from distribution.
Before retirement assets can be divided, they need to be properly valued. The values of the account at the time the marriage began and the date of divorce will determine the “marital share” or portion of the account that will be divided. For defined contribution plans, like 401(k)s, 403(b)s or IRAs, it is a relatively straightforward exercise to determine these values since these accounts have exact, ascertainable values.
For defined benefit plans, such as pensions, the valuation is more complex. A pension’s value depends on several factors, including the length of time the spouse worked relative to the length of the marriage, the spouse’s salary, and other factors. In many cases, the exact value of the pension is difficult to quantify at the time of divorce. Pension benefits will typically be divided on an “if, as and when” basis – if the spouse receives their pension, as the spouse receives their pension and when the spouse receives their pension. In other words, if you have a marital claim to your spouse’s pension, you will likely not receive your marital share of the pension until your spouse retires or otherwise becomes eligible to receive their pension.
As noted above, retirement assets are often one of the most valuable – if not the most valuable – types of assets which are divided as part of the divorce. When assessing the division of retirement assets as part of a divorce, it is important to understand what a “fair and equitable” division of such assets looks like in your case. Make sure to avoid the following mistakes:
If you’re facing a divorce in Maryland and need help navigating the complexities of retirement division, it’s wise to consult with an experienced divorce attorney who can guide you through the process and help you understand your rights. The Greenberg Legal Group (https://greenberglegalgroup.com/) represents clients in divorce matters and issues regarding the division of marital property. Our firm is located in Annapolis, Maryland and practices in Courts throughout the State of Maryland. Please contact our office at (410) 924-7717 for further assistance.
