High Asset Divorce Needs Skilled Legal Counsel

How are retirement accounts divided in divorce?

On Behalf of | Feb 10, 2022 | Complex Asset Division |

Many workers in Alabama receive benefits through their employment in addition to their regular income. Some receive reduced health insurance premiums, health savings accounts, life insurance policies, company vehicles, bonuses, contribution to retirement accounts, stock options and other benefits. While these benefits are directly given to only the employee, if the employee is married those benefits are often enjoyed by both spouses during the marriage.

It also means that if the couple ever goes through a divorce some of the benefits will need to be divided like other marital property. One of those types of benefits are the retirement accounts. Many people have 401(k)s or pensions through their employers which their employers contribute to during employment. These accounts have value and must be divided like other financial accounts.

How to divide the marital portion of retirement accounts

In general, the marital portion of the retirement account is divided equitably, but judges cannot order that the noncovered spouse receives more than 50% of the total marital value of the retirement plan, unless the spouses agree otherwise.

Determining the marital portion of the retirement account can be complicated though. Many people start the retirement account prior to marriages and any portion they had in their account prior to the marriage is not included in the marital portion of the account. People are also entitled to any passive gains on the non-marital portion of the account. Passive gains are the amount the non-marital portion would have gained through the market if the spouse did not contribute to the total amount in any way.

When people go through a divorce in Alabama they need to divide the life they shared into two separate lives. This includes dividing any retirement accounts that either spouse contributed to during the marriage. It is important that people are only dividing the marital portion of the retirement account though, which might not be the entire amount in it. It is the burden of the spouse claiming a non-marital portion to prove this amount though and experienced attorneys may be able to guide one through the process.