For many couples, retirement accounts represent a major portion of their marital assets. Most depend upon the availability of these funds in order to meet their needs in their later years. When a New Jersey couple divorces, the laws governing how retirement assets are treated can be complicated. A New Jersey divorce attorney with experience in high-asset issues can help you understand which part of your or your spouse’s retirement assets are subject to equitable distribution and what is necessary in order to protect your share of those assets.
New Jersey is an equitable distribution state. That means that when a couple divorces, marital property is divided equitably, or fairly, but not necessarily equally. In general, retirement assets are subject to equitable distribution. However, contributions made before the marriage took place or after a divorce complaint is filed may be excluded. This also applies to any interest earned on these contributions.
Some types of retirement accounts are subject to the Employment Retirement Income Security Act, or ERISA. This federal law sets minimum standards for most voluntarily established private-sector pension and health plans. Its purpose was to protect individuals in these plans. Most corporate accounts, such as 401k plans, fall into this category.
Funds from retirement assets based on plans covered by ERISA can be distributed to a former spouse only if a QDRO is ordered by the court and approved by the plan administrator.
When entered as part of the equitable distribution of marital property in a divorce or legal separation, the QDRO specifies how the account is valued and exactly what the former spouse’s share of the assets will be. In some cases the recipient will be able to take that share immediately and roll the money over into his or her own retirement account (IRA). In other cases the former spouse might have to wait until retirement actually occurs.
Think Long Term
When you are going through a divorce, retirement may seem to be in the distant future. You may be tempted to give up retirement assets in exchange for another marital asset, such as your home. Be sure to consider all factors, such as the return on those investments, before making any decision. Giving up your share of retirement assets can have an adverse effect on your future finances.
When retirement and other substantial assets are involved, it is important that you obtain the advice of an experienced New Jersey divorce lawyer.
Do you have questions about retirement assets, QDROs, equitable division of marital property, or other divorce issues? The experienced equitable distribution attorneys at Aretsky Law Group, P.C., can answer your questions.