How Are Retirement Accounts Divided in a New Jersey Divorce?

When people get divorced, things like joint bank accounts, the marital home, and alimony are typically top of mind. However, one of the most significant assets that may be subject to equitable distribution in a divorce is retirement accounts. Continue reading and reach out to the seasoned divorce lawyers in Sussex County here at Gruber, Colabella, Thompson, Hiben & Montella to learn more about how retirement accounts are divided in a divorce and how we can help protect your hard-earned assets. Here are some of the questions you may have:

Is a Retirement Account Considered Marital Property in New Jersey?

In many cases, the answer is yes.

That being said, not every dollar contained within a retirement account is automatically considered marital property. New Jersey follows the principle of equitable distribution, which means that marital property is divided in a manner that the court considers fair. Importantly, fair does not always mean equal. Rather, courts will look at various factors and circumstances before determining how assets should be divided between spouses.

Generally speaking, retirement contributions made during the marriage are considered marital property and may be subject to division in a divorce. Some of the most common types of retirement accounts that may be divided include:

• 401(k) plans
• Traditional IRAs
• Roth IRAs
• Pension plans
• 403(b) plans
• Government retirement plans
• Military retirement benefits

In many situations:

• Contributions made before the marriage may remain separate property.
• Contributions made during the marriage are typically considered marital property.
• Growth associated with marital contributions may also be subject to division.
• Financial records are often reviewed to determine what portion of an account is marital and what portion is separate.

Simply put, even if a retirement account is only in one spouse’s name, that does not necessarily mean the other spouse has no claim to a portion of its value.

How Does the Court Determine Who Gets What?

Unlike what many people assume, New Jersey courts do not simply divide every retirement account directly down the middle. Instead, courts evaluate various factors to determine what would constitute an equitable distribution of marital assets. Some of the factors that may be considered are as follows:

• The length of the marriage
• The age and health of each spouse
• Each spouse’s income and earning capacity
• Contributions made to the marriage by each spouse
• The standard of living established during the marriage
• The value of other marital assets
• Any valid prenuptial or postnuptial agreements

What Is a Qualified Domestic Relations Order (QDRO)?

If certain retirement accounts are going to be divided during a divorce, a Qualified Domestic Relations Order, commonly referred to as a QDRO, may be required.

Essentially, a QDRO is a court order that directs a retirement plan administrator to distribute a specified portion of retirement benefits to a former spouse. Without a properly drafted QDRO, problems can arise, even if the divorce agreement itself clearly states how the retirement account is supposed to be divided.

A QDRO may:

• Identify the retirement plan being divided
• Specify the amount or percentage being transferred
• Explain how benefits are to be distributed
• Ensure compliance with applicable federal laws and regulations

Ultimately, retirement accounts are often among the most valuable assets a person owns. Because of this, determining how those accounts will be divided is rarely something that should be taken lightly. Whether you have spent years contributing to a 401(k), have accumulated substantial pension benefits, or simply want to understand your rights before beginning the divorce process, you should strongly consider reaching out to a knowledgeable and experienced family law attorney here at Gruber, Colabella, Thompson, Hiben & Montella. We are here to guide you through each step of the legal process ahead and ensure your rights and interests are protected at all times.