What Happens to Retirement Accounts After Divorce?

New York is an equitable distribution state. This means that assets accumulated during a marriage are marital assets that will be divided equitably in the divorce. Assets in this category include real estate, cars, stocks, and joint bank accounts. Also, according to New York law, funds in retirement accounts that were accumulated during the marriage are also marital assets. The ex-spouse is entitled to a share of the spouse’s retirement benefits.

Examples of Employer-Sponsored Retirement Accounts

Some examples of employer-sponsored retirement accounts subject to equitable distribution include, but are not limited to:

• Annuities.
• Deferred compensation plans.
• Employee Stock Ownership Plans (ESOP)
• IRAs.
• Profit-sharing plans.
• 401(k) plans.
• 403(b) plans.

It is not enough to have the court issue an order dividing the plan between the spouses, there must also be a Domestic Relations Order (DRO).

Domestic Relations Orders

A Domestic Relations Order (DRO) is complex. The order provides for how the funds in retirement accounts are to be divided, survivor benefits, loans that may have been taken out of the retirement fund, and more.

Generally, the ex-spouse receives half of the funds that were accumulated in the account during the marriage. There is a mathematical formula used in a DRO to calculate the amount the spouse received based on the number of years the couple was married at the time of the distribution.

Separate Property Funds – Pre and Post Marriage

When a retirement fund is divided during the divorce, the funds that were deposited prior to the marriage, and the increase of those funds due to interest, remain the separate property of the owner of the retirement fund.

It often requires a financial professional to sort out the amount that was deposited both pre and post marriage.

Experienced Divorce Attorneys Can Help

Dividing funds in a retirement plan pursuant to a divorce is complex. You need an attorney who understands how to protect your rights and who will make sure you are not surprised at retirement when funds you expected to be available are not because the DRO was not properly prepared.

For more information, contact our divorce attorneys at Rosenthal & Markowitz.