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What happens to retirement assets when going through a divorce

On Behalf of | Nov 4, 2019 | Divorce, High-Asset Divorce

Divorce is not an easy or pleasant thing to go through. The most you can hope for is that you’ll get it over quickly while inflicting minimal damage on your finances and your family. One area may be hoping to spare yourself involves your retirement assets.

It doesn’t matter if retirement is just around the corner or years away, the funds you’ve been putting aside you need so you can live the life you hope to during your golden years. The problem is that retirement assets are marital property according to the state of Colorado, which means your spouse may have the right to take a portion of your retirement earnings when the marriage comes to an end. However, if any of the following are true about your circumstances, you may be able to protect your property from division:

  • You received or earned the funds before the wedding
  • You have a prenuptial agreement that identifies retirement savings as separate property
  • You have a postnuptial contract that identifies the savings as separate property

Every case is different, so it would be best to discuss your situation with an experienced family law attorney to find out how the court may identify and divide your assets. 

Equitable property state

Colorado is an equitable property state. This just means that the division of property has to be fair. The split does not have to be 50/50. That can happen in a number of ways. If no marital contracts are in place, you and your soon-to-be ex have to decide how to divide assets in a way that is hopefully beneficial to both parties.

The problem with splitting retirement accounts

If not done the right way, there can be significant tax implications for taking money out of employer-sponsored retirement accounts early. A Qualified Domestic Relations Order can help you avoid any penalties. Drafting a QDRO is not necessarily difficult, but getting it approved may be. This order cannot take effect without plan administrator and court approval.

Do you have to split retirement accounts?

Not necessarily. If you have other assets that you are willing to give up in order to keep your retirement savings intact, you may be able to reach settlement terms that allow for that. At the end of the day, it is necessary to look at property valuation, your future goals, and alimony and child support orders to determine the best way to treat these and other assets. However, if your spouse wants his or her share instead of other assets, splitting the accounts may be unavoidable.

Fair property division terms are possible

When trying to get through a divorce quickly, you might think it’s easier just to part with whatever assets your spouse wants. You do not have to do that, though. With the right help, it is possible to make decisions that will allow you to reach fair and balanced property division settlement terms that may or may not include the splitting of retirement assets.