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How do you divide your retirement accounts in a divorce?

On Behalf of | Dec 14, 2022 | Divorce

How your retirement accounts are divided in your divorce depends on which state you’re living in, as it will be a matter of equitable distribution or community property. Washington is a community property state, so all debts and assets accrued by both parties throughout the marriage are split evenly in the event of a divorce.

Courts decide the most equitable way to distribute the funds

For states utilizing equitable distribution, it’s up to a court to decide how to split the marital property. The aim is to be as fair as possible, but that doesn’t always mean retirement accounts are equally divided.

In general, the earnings each person added to their respective retirement funds while married qualify as marital assets, making them divisible in a high-asset divorce. Any earnings from before the marriage are considered premarital retirement savings.

How these accounts are divided can impact the funds you’ll rely on once you’ve retired, making it one of the most important elements of a divorce. After you’ve discussed Washington state laws with your legal team and know what to expect, you can decide what steps to take next.

Qualified Domestic Relations Order

For 401(k) accounts, a judge mandates the division of applicable funds using a Qualified Domestic Relations Order (QDRO). If one spouse didn’t previously have a 401(k) account, they can open a retirement account to put in their share or have the funds paid out, the latter of which is called outright distribution.

Divorce is complicated, and deciding how to split up your retirement funds doesn’t make it any easier. However, planning and preparation can make it possible to get through the process with little hassle.