How Is My 401(K) Divided in New Jersey Divorce?

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Some spouses in New Jersey are surprised to learn that their retirement accounts are subject to division during a divorce. The accounts are in their individual names and may be the basis of their employment status. However, these accounts very often are subject to divided during divorce.

Equitable Distribution

New Jersey uses equitable distribution laws at the time of divorce. If a court is tasked with the duty to divide property, it analyzes which property is marital and which is separate. Separate property is that property owned before the marriage, received via gift or inheritance, property acquired through the use of separate property or property acquired in very specific ways under New Jersey law. Marital property is the property and income that was acquired during the marriage, including real property, stocks, bonds, financial accounts, businesses and retirement accounts.

If a spouse owned property prior to the marriage but the property increased in value during the marriage, the increase may be subject to division.

Factors Considered During Property Division

A court considers a number of factors when determining how to divide property. It considers the length of the marriage, along with the age and physical and mental health of each spouse. Additionally, it considers the economic circumstances of each spouse, the standard of living of the spouses and the contribution that each spouse made to the marriage, including the contributions of a stay-at-home spouse. The court can also consider the value of the property in question, the tax implications of division, the debts of the parties, the income and property brought into the marriage by each party and the earning capacity of each party. The court seeks to make a fair distribution of the property. However, this does not mean that the court will always make an even 50/50 split.

Retirement Accounts

A 401(k) is one type of retirement account. This type of account is often found to be a marital asset that is subject to equitable distribution. In some couples, only one spouse has a retirement account. He or she may be the breadwinner of the family. Over time, these types of accounts may grow to a substantial value. The portion of the retirement account that increased during the marriage is usually subject to division. For example, if the wife had a retirement account that had a value of $100,000 at the time of marriage and this account was worth $200,000 at the time of divorce, the spouse would have an interest in $100,000 of the fund. The court may award the spouse $50,000 for his or her share of the marital portion of the fund. If the account was established during the marriage, the whole fund may be subject to division. Normally, the cut off date is the date of the filing of the divorce action. Any contributions that the wife made before the marriage or after the cut off date would be the wife’s separate property.

Qualified Domestic Relations Order

A qualified domestic relations order is usually required when dividing a retirement account. A qualified domestic relations order is a court order that a judge makes in family court that instructs the administration of the retirement account or pension to divide the account. This is an important step in the process because if a person makes a large distribution of a retirement account without an order of this nature, he or she may face significant taxes and penalties due to taking the funds out early. Additionally, the divorce action itself does not have authority over the retirement plan administrator. The qualified domestic relations order gives this authority.

Other Arrangements

The parties may be able to make their own decisions regarding how to divide the property. The spouses may agree to be able to keep their own retirement accounts or to exchange interest in the other spouse’s retirement account for another asset like the marital home.

You May Seek Legal Guidance

Laws regarding property division in New Jersey can often be very complicated. There is often a lot at stake during a New Jersey divorce. When a spouse is considering divorce, it is important that he or she seek the advice of an experienced divorce lawyer. He or she should be knowledgeable in the relevant divorce laws in the jurisdiction and should be able to explain how these laws may impact you. He or she can also offer important perspective so that you look at achieving your long-term goals and not to solely focus on your short-term goals.


Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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