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How are retirement accounts handled in a New Jersey divorce?

On Behalf of | Oct 20, 2024 | Divorce

Married couples living in New Jersey often share their resources and responsibilities. By pooling their assets and efforts, they can maintain a comfortable lifestyle. They may then worry about what happens if they decide to divorce.

Both spouses may have contributed to one joint retirement savings account. However, it is relatively common for each spouse to make deposits into their own, separate accounts as retirement accounts often have a direct relationship with employment arrangements. If spouses who have saved for retirement during a New Jersey marriage decide to divorce, they may both have questions about what happens with those savings.

What typically happens to retirement funds when New Jersey couples divorce?

Savings may be part of the marital estate

Some couples decide to sign prenuptial agreements before they get married. They may have already clearly established what should happen with different marital assets and may have protected a certain resources like retirement accounts, as separate property. Without a prenuptial agreement, spouses likely have to address property division as they prepare for divorce.

What either spouse has set aside to save for retirement during the marriage could be subject to division if they divorce. Even in scenarios where the account is in the name of one spouse and they are the only one who contributed toward the account, contributions made using marital income are likely subject to division. Provided that spouses follow the right procedure when dividing retirement savings, they don’t necessarily have to worry about tax consequences or financial penalties.

New Jersey’s equitable distribution statute may apply, and the couple may need to divide the account. However, splitting the account directly isn’t always necessary. So long as the couple accurately determines the marital portion of the account, it may be possible to factor the value of the retirement account into property division negotiations without actually dividing the account.

If the spouses agree that a specific settlement is fair, they can potentially proceed with an uncontested divorce. If they litigate, a judge may make that determination. A judge could order the division of the account in light of other property division decisions. A judge may also have the authority to award the account to one spouse while offsetting its value with responsibility for marital debt or a larger portion of certain marital assets.

Learning about the different rules and potential approaches to property division that can be taken may be beneficial for those with valuable resources, like retirement savings accounts. Spouses can either reach their own arrangements through mutual agreement or provide information to the courts to obtain a reasonable property division order from a family law judge.

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