Protecting What Matters Most

Are separate retirement accounts divisible in a New York divorce?

On Behalf of | May 14, 2024 | Divorce

Dividing financial resources can be one of the most challenging elements of a New York divorce. The longer spouses have remained married and the more they have earned during the marriage, the more property they have to argue over as they prepare to divorce.

Particularly when spouses have enjoyed a relatively comfortable standard of living throughout their marriage, they worry that the decision to divorce could have a negative impact on their future finances, especially when it comes time to retire. Those preparing for divorce are often eager to limit what resources are at risk, including their retirement savings.

People frequently worry that dividing their retirement savings might undermine their standard of living later in life or prevent them from retiring at all. Can someone protect their retirement resources as their separate property in a New York divorce if the account is solely in their name and their spouse never contributed to it?

The name on the account isn’t what the courts consider

When determining what assets are part of the marital estate, the New York family courts primarily at the date of acquisition. Simply maintaining an account in one spouse’s name doesn’t make it their separate property.

A retirement account could easily be partially marital property and partially separate property. One spouse may have started saving before they married, and those early contributions might be separate property that they do not have to divide. However, the amounts added to the account during the marriage are likely subject to division when the spouses divorce.

The income used to fund the account was marital income, and therefore the balance accrued during the marriage is subject to division. Thankfully, actually dividing the account isn’t the only way to properly address it in asset division negotiations. Spouses can determine the marital value of their separate retirement savings accounts and then factor those balances into the overall property division process.

It is sometimes reasonable for one spouse to retain the entirety of their retirement savings account provided that they allow their spouse to keep other property worth a comparable value. Other times, accepting responsibility for a larger portion of marital debts could also help justify the retention of a retirement account. If someone does have to divide their retirement savings, it is possible to do so without taking additional losses related to tax obligations and penalties.

Understanding how a court is likely to approach to retirement savings in a New York divorce can help people prepare for property division proceedings. Spouses who enter negotiations with accurate information are in a better position to secure appropriate terms in their final property division orders.


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