What will happen to my retirement, 401(k), pension and other assets in a divorce?

People considering divorce face a flood of concerns: about their children, and their futures, their home, their finances, and their belongings. There are many challenging aspects to divorce, one of which is dividing assets. What happens to assets during a divorce?

The first thing to know is the difference between pre-marital assets and marital assets. Pre-marital assets are belongings or other items that were owned by either spouse prior to the marriage. This could include furniture, real estate, financial gifts from relatives, an inheritance, art, etc. Note that, with regard to pre-marital assets, if at any point these items get commingled with marital property—a title gets changed or an inheritance gets transferred into a joint account—it may become considered martial property.

Conversely, then, marital assets are any items or income acquired during the marriage. Regardless of whose name those items are in, marital assets could include 401k or other retirement plans, brokerage accounts, life insurance, real estate, businesses, bank accounts, or antiques or other belongings.

Different states have different rules with regard to distribution of marital assets. Some states are “community property” states—that is, states that consider spouses as equal owners and divide property 50/50. Some states are “equitable distribution” states—that is, states that require distribution to be “fair and equitable,” not necessarily equal.

In addition to an audit of marital versus pre-marital assets, there are many things taken into consideration with regard to division of those assets during a divorce. Those might include but are not limited to:

  • Income of each spouse
  • Earning potential of each spouse
  • Length of marriage
  • Physical health of each spouse
  • Financial situation of each spouse post-divorce
  • Continuity of lifestyle for children
  • Contribution of a spouse to earning power of the other

Even in the most amiable of divorces, dividing marital assets can be difficult and emotional. While some couples are able to negotiate and come to agreement on how basic assets, like furniture, get divided, identifying and coming to agreement on division of things like real estate and financial accounts can be a lot more precarious. By using an experienced divorce attorney and financial advisor, you can ensure that your interests and future are protected.