New Jersey is an equitable distribution state, which means that when a couple divorces, the marital property should be divided fairly, as compared to an automatic 50/50 split. Marital property generally includes anything that you and your spouse earned or acquired over the course of your marriage, including real estate property, vehicles, bank accounts, life insurance policies and valuable jewelry, furniture, or art. If your spouse has participated in a 401(k) plan over the course of your marriage, these funds may also be divided as part of the divorce settlement. However, the process of splitting up a 401(k) can be complicated, particularly as every 401(k) plan is unique, and there are several factors that will need to be considered when determining how the funds will be distributed.
What Do I Need to Know About the Process of Splitting Up a 401(k)?
Dividing a 401(k) is not always a simple and straightforward process.
- You will need a court order. A judge will need to sign off on a Qualified Domestic Relations Order (QDRO), which is a court order that allows you to receive a percentage of the 401(k) funds. A plan administrator will not disburse funds from a 401(k) plan without a QDRO.
- State laws dictate how the funds are distributed. New Jersey aims to split the funds in a manner that is fair to both parties.
- There are several distribution options. If you are to receive money from your spouse’s 401(k), you have several options for getting the money, though there may be taxes due and owing or early withdrawal penalties, which should be consideration. Some options include:
- Rolling the assets over into your own retirement plan by requesting a direct transfer;
- Deferring the distribution until at later point in time;
- Cashing out a portion of the balance.
- If your spouse wants to keep all of their 401(k), you may be entitled to other marital assets that are of equal value. Weigh the pros and cons of this option, including the long-term value of the 401(k) and the assets you are being given.
- You may be able to work out your own agreement. If you and your spouse are able to reach an agreement about how the funds in a 401(k) account should be split, you can save a significant amount of time, money, and frustration. Consider consulting with an experienced divorce lawyer to ensure that the agreement is fair.
Whitehouse Station Divorce Lawyers at Tune Law Group, LLC Protect Client’s Financial Interests During the Divorce Process
If you are going through a divorce, and you have questions related to your settlement, and whether you are entitled to your spouse’s 401(k), you should contact the Whitehouse Station divorce lawyers at Tune Law Group, LLC. To schedule an initial consultation, call us today at 908-434-1061 or contact us online. Our office is located in Whitehouse Station, New Jersey, where we serve clients in and around Tewksbury, Hunterdon County, Monmouth County, Morris County, and Warren County.