When it comes to property division, most people’s thoughts drift to tangible assets, such as homes and vehicles. However, any property division agreement must also consider retirement savings and pension plans. Depending on your job, how much you’ve invested, and the length of your marriage, a 401(k) or pension plan may represent a significant portion of your assets.

Marital property or separate property?

We’ve posted blogs before that go into great detail regarding the differences between marital property and separate property, so we’ll keep things relatively simple here. Marital property is subject to equitable division. Separate property is not.

Retirement accounts and pension plans usually fall into the marital property category. However, how they’re divided can differ.

Dividing 401(k)s, IRAs and other forms of retirement savings

Retirement savings accounts are usually considered to be marital property for the length of your marriage. In other words, if you’ve had a 401(k) for 20 years, but were only married for 10 of those years, only the amount you’ve invested during those ten years of marriage will be divided. Also, your ex may not receive more than 50% of your retirement account.

This is not to say that your ex will get half of the contributions you made during your marriage. Equitable distribution does not mean the same thing as equal distribution. Rather, any division must be fair. Several factors will apply when reaching an equitable determination.

Dividing pension plans

There are two general approaches to dividing pension plans. You can rely on the current value of your pension plan and divide things accordingly. You can also wait to divide the plan upon retirement. If you choose to defer payment until retirement, both you and your ex must agree to and submit a Qualified Domestic Relations Order (QDRO).

Determine which options are best for you

Dividing retirement accounts and pension plans can raise a lot of complex issues. Some accounts may come with significant penalties for early withdrawal. You may wish to come to an agreement where one spouse receives a more substantial chunk of the marital property pie. This can help preserve a retirement plan for its intended purpose. In either case, you should discuss all of your options with a skilled legal professional who can help guide you through this process.