For many, retiring is something they look forward to. After decades of working hard, spending time relaxing and enjoying your older years is a significant goal for many. As such, whether you’re just starting in your first full-time role or a seasoned corporate professional, making contributions to your 401(k) will benefit you in the long run. However, if you’re going through a divorce, it’s critical to understand that your retirement funds may be at risk. Keep reading to learn what you should know about these matters and why it’s critical to connect with a Nassau County property distribution lawyer to explore your options.
How Does New York Divide Property During a Divorce?
In a New York divorce, property is divided based on each spouse’s contributions to the marriage, under the equitable distribution method. Essentially, this means that each party is not entitled to an even 50/50 split of marital assets, but rather a split based on how much each spouse deserves.
Generally, a marital asset is anything you obtain during the marriage or a separate asset that is co-mingled with marital assets. For example, if you have a business you opened before your marriage but used funds from a shared bank account to invest in the company, it would likely be considered a joint asset since you used marital funds.
It’s also important to understand that the contributions the courts will consider are not solely financial. They will consider both domestic and financial contributions, as this ensures that stay-at-home parents are protected during this process.
Is My 401(k) at Risk?
When you’re in the midst of a divorce, understanding whether or not your retirement funds are at risk is critical. Generally, your 401(k) is considered a marital asset, meaning it could be at risk for division. However, only the funds you accumulated during your marriage are subject to division.
For example, if you had $25,000 in the account before you were married and accumulated another $50,000 during your marriage, only the $50,000 would be subject to division. The money in the account before you were married will remain separate property.
Is There Anything I Can Do to Protect Myself?
Generally, when you are in the middle of a divorce, it’s important to understand that you may not have many options to shield your 401(k). Unlike those who have not married, you cannot create a pre-nuptial agreement regarding how this will be handled during a divorce.
Instead, you’ll likely be limited to negotiating how this property will be divided. For example, you may be able to negotiate with your spouse to retain the full funds in exchange for an asset of equal value to their portion of the 401(k). Additionally, if your spouse wants the funds, you’ll need to look into a Qualified Domestic Relations Order (QDRO) which allows you to withdraw funds from the retirement account without incurring the tax penalties associated with an early withdrawal.
As you can see, many matters must be carefully considered during these times. That’s why it’s in your best interest to connect with an experienced attorney who can guide you through these challenging times to help you fight for the best outcome possible. At Barrows Levy, we understand how important your retirement is to you, which is why we will do everything in our power to fight for a favorable outcome. Connect with us today to learn how we can help you.
