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What happens with retirement accounts in a New Jersey divorce?

On Behalf of | Oct 23, 2023 | Divorce

The average retirement savings in the U.S. for people ages 35 to 44, according to Synchrony Bank was $254,720 in 2023. This fact is good to know when you find yourself in a divorce.

Divorce is a significant life event, and it often involves complex financial matters, including the division of retirement accounts. In New Jersey, the rules for the division of retirement accounts ensure a fair and equitable distribution between the spouses.

Marital property designation

In the Garden State, retirement accounts you acquire during the marriage are marital property. This means that they are subject to division between you and your spouse.

Examination of accounts

The court examines the total value of the retirement accounts owned by both spouses. It is important to note that this evaluation includes not only 401(k) plans but also other types of retirement assets, such as pensions, IRAs and deferred compensation plans. Once the court determines the total value, it works to ensure that each spouse receives an equitable share of the marital portion of these assets.

The concept of equitable distribution does not necessarily mean an equal 50/50 split. It focuses on what is fair and just based on various factors. These factors may include the length of the marriage, the contributions of each spouse to the marriage, your respective financial and non-financial contributions and the financial needs and circumstances of each of you.

Court order requirements

When it comes to dividing retirement accounts, a Qualified Domestic Relations Order often comes into play. A QDRO is a legal document that establishes each spouse’s right to a portion of the retirement account. The QDRO must comply with the plan administrator’s requirements and the standards set by New Jersey law.

Some retirement accounts, like IRAs, may not require a QDRO but instead, a different type of court order known as a distribution order. This order specifies how the assets should transfer from one spouse to the other.

Once the court prepares or approves the QDRO or distribution order, it goes to the plan administrator, who is responsible for executing the division of the retirement account. The plan administrator will then follow the instructions outlined in the order to transfer the designated portion of the retirement account to the non-owning spouse.

The division of retirement accounts during divorce follows a structured process based on equitable distribution principles. Following the rules is essential to avoid any legal issues during or after the divorce.


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