When an individual is notified that divorce proceedings have begun, one of their first considerations is often regarding what they will be required to split with their spouse. This includes the common question, “Can I get half of my spouse’s retirement in a divorce?” The answer could be yes—but it does not have to be.
To determine how much of a spouse’s retirement the other party is eligible to receive in a divorce, it is essential to understand how retirement funds are labeled and how much of the total balance is at stake.
The following explores what happens to retirement funds during a divorce, including how assets are divided as part of the process and how to protect your share of marital retirement funds.
Understanding Marital and Non-Marital Funds
Each state has its rules regarding how a person’s funds are labeled once married. Maryland distinguishes between marital and non-marital funds, and a divorce can only claim retirement compensation from marital funds.
Marital funds are those earned after the marriage. Income placed into a retirement account after the individual becomes contractually married is considered joint property and thus eligible for asset transfer during a divorce.
Conversely, non-marital funds are those earned before the two parties were married, alongside any assets each person brought into the marriage before its inception. Some exceptions also exist, such as one spouse being gifted an asset explicitly directed only to that individual or receiving an inheritance.
These unique situations transfer assets to only one party in the marriage and are considered non-marital property even if the marriage has already occurred at the time of transfer.
How Assets Are Divided
When the court examines how to divide the assets in the divorce, it will abide by Maryland’s equitable distribution rule. This means that the assets will be split in an equitable but not necessarily equal way.
The other assets an individual receives in the divorce will factor into how much of the other party’s retirement they may be granted. For example, if one person is receiving the entirety of the house and property, they are less likely to receive a large share of the retirement as well.
Any retirement assets split between the parties are secured from marital funds. Pension plan benefits can constitute marital property and are eligible for division among the partners during a divorce.
The court will examine a person’s career outlook, total earning capacity, outstanding obligations (such as childcare), health and disability, and more when fairly dividing assets.
Thus, a person who is doing well on their own may not qualify to receive much, if any, of their spouse’s retirement funds, especially if the other spouse’s income is lower, or they have incredible difficulties—an aging parent in the home, student loan debt, a physical disability or some other challenge.
How to Protect Marital Retirement Funds
When seeking to protect marital retirement funds from the other partner during a divorce, the best step is to consult a legal professional. Any attempt to hide funds or shelter them from the division will not reflect favorably on your case and can result in more stringent division by the court.
When preparing to separate, your first steps should be to reach out to a legal team and acquire bank statements and other supporting documentation to demonstrate how much of the total balance of a retirement account is made of non-marital funds. It will be the responsibility of the affected party to prove this.
Additionally, acquire a QDRO or qualified domestic relations order. This legal order ensures that the standard penalties and fees that would apply for withdrawing from a retirement account, such as a 401(k), do not occur during the transfer of assets in a divorce.
If a prenuptial agreement was in place that spoke to the distribution of retirement account funds, it takes precedence over the court’s decision as long as it is legally binding.
Protect Your Share of Funds with the Help of a Legal Professional
Although divorce is often challenging, there are ways to protect as much of your retirement balance as possible throughout the process. The legal team at Milstein Siegel can help divorcees adequately demonstrate non-marital assets and create a compelling case to shield as much of their property as possible during proceedings.
Contact our firm to schedule a consultation to discuss your options and protect your assets during a divorce.