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Can a Divorce Impact My Retirement Funds?

The goal of the divorce process is to split two joined lives into two separate lives, but this is easier said than done. A key aspect of most splits is the equitable distribution process: when a spouse asks the court for assistance in dividing assets and debts acquired during the marriage. However, do North Carolina equitable distribution procedures apply to retirement funds?

Equitable Distribution: Property Types

In North Carolina marriages, there are two kinds of property: marital property and separate property. Separate properties are assets and debts that either spouse had before the marriage, and this property will not be divided between the spouses.

Marital properties are assets and debts acquired during the marriage (not including individual inheritances and gifts received from a third party,) and these assets are split equitably by a judge.

Equitable Distribution: Retirement Funds

North Carolina’s definitions of marital property and separate property have huge implications on retirement funds. If someone created and funded a 401K during a marriage, then the 401K is considered marital property. As previously stated, marital property is split equitably by North Carolina judges, so the entire 401K (the principal and the earnings) should be split between the divorcing spouses.

While a 401K established during a marriage is easy to divide, a 401K created before marriage is a complicated issue.

A 401K created and invested in before marriage is technically separate property because the spouse had the asset before the marriage. However, a spouse will likely continue investing in a premarital 401K during the marriage, which means funds placed in the account during the marriage are technically marital properties.

Therefore, the same retirement account may simultaneously contain funds that are separate property and funds that are marital property.

Additionally, a premarital 401K’s earnings during a marriage union are considered marital property and can be divided. As a result, the inter-marital investments and earnings of a premarital 401K will be split by a judge during a divorce.

Get Help with Your Retirement Funds

If your 401K needs to be split between you and your spouse, it’s crucial to have an experienced property division attorney on your side. An attorney will determine what funds of a 401K should be divided between you and your spouse, and what funds should stay in your account. Once your attorney determines the appropriate allocation of funds, he or she will argue for this outcome in front of a judge on your behalf.

Need help with asset division? Call (704) 200-9278 to set up a consultation now!