Your Right to Retirement Assets
To many, retirement accounts are the most valuable asset in a marriage. According to the U.S. Census Bureau, the median value of 401(k) accounts in 2020 was $30,000. As such, it is important to understand how Tennessee courts divide retirement assets in the event of a divorce.
If you are considering filing for divorce or are already in the process of ending your marriage, you need to know how retirement assets are divided. Our team at the Law Office of Joshua S. Reed can help you protect your right to retirement assets if you are going through a divorce in Farragut or Knoxville, Tennessee, or the surrounding areas.
Division of Property in Tennessee
In Tennessee, marital property is subject to equitable division during a divorce. This means that any assets acquired by either party during the marriage—including retirement accounts—will be divided in an “equitable” manner based on the circumstances of each particular case.
This does not necessarily mean that everything must be split 50/50. Rather, it means that the division should reflect what is fair and reasonable under the particular facts at hand.
When deciding how to divide marital property in an equitable manner, courts consider numerous factors including but not limited to:
the duration of the marriage
each spouse’s age and health condition
each spouse’s past and present contribution to the acquisition of marital assets
each spouse’s economic circumstances prior to and after the divorce
each spouse’s earning capacity
any interruption or destruction of a career due to homemaking or parenting duties
any pre-existing debts of either party
any other relevant factors as necessary
Consider speaking with an experienced asset division attorney to discuss how marital property will be split in your specific case.
How Retirement Assets Factor In
Retirement accounts such as 401(k), 403(b), IRAs, pensions, military disability benefits, and others, are considered marital property if they were acquired by either party during the marriage—regardless of whose name appears on them. As such, these assets are subject to equitable division upon dissolution of marriage.
If an account was created prior to the marriage or if contributions were made only by one spouse, then it may be considered separate property and not subject to division. Conversely, if both parties contributed to the account or if there was a significant appreciation in value during the marriage, then it may be considered marital property and subject to division.
Furthermore, if at least one party had retired before filing for divorce and has begun taking distributions from their pension plan or other types of retirement accounts, then those distributions may also be subject to division between spouses.
Qualified Domestic Relations Order (QDRO)
Often, courts order one spouse to transfer some portion—or all—of their interest in retirement accounts directly to their former spouse via a Qualified Domestic Relations Order or QDRO.
The court can also order one spouse to pay some portion—or all—of their former spouse’s attorney fees related to the preparation of the QDRO.
The purpose of a QDRO is to ensure that all marital assets are properly divided between spouses while minimizing any potential tax liabilities resulting from early withdrawals or transfers between plans.
What Are the Tax Ramifications of Dividing Retirement Accounts in a Divorce?
When dividing retirement accounts as part of a divorce settlement in Tennessee, it’s important to understand that, depending on the type of account and how it is divided, there may be taxes associated with that division.
For example, if both parties agree to split contributions made to an employer-sponsored plan like a 401(k), generally, no taxes will apply.
However, if one spouse takes all or part of the other spouse’s retirement account upon the dissolution of their marriage (e.g., IRA), then taxes may be applicable due to early withdrawal penalties. It’s important to consult with your attorney regarding any potential tax implications when dividing retirement accounts during your divorce proceedings.
How a Family Law Attorney Can Help
Retirement assets come in many forms, including 401(k)s, IRAs, pensions, annuities, and more. It is important that each asset is identified and its value determined so it can be divided properly during the divorce process. And when it comes to dividing retirement assets in a divorce, there are many different factors to consider.
A skilled family law attorney will know what types of documents and information need to be collected in order to adequately assess each asset’s value. This includes understanding any tax implications associated with transferring or liquidating any type of account or asset.
Additionally, an attorney who serves clients in your state will have familiarity with the laws pertaining to financial matters in divorce cases, which can make all the difference when negotiating for the best possible outcome for you.
Protect Your Right to Your Retirement Assets
Understanding how retirement accounts will be divided in the event of a divorce is critical for anyone in the process of divorce or considering ending their marriage. With the proper knowledge and guidance from our attorney at the Law Office of Joshua S. Reed, individuals can make sure that their assets are divided fairly and equitably. Reach out to our office today to schedule a free case review.