When you face a divorce in New York, dividing your retirement assets can be complex and emotionally charged. This article reveals what might happen to your retirement savings and benefits during a divorce in the Empire State.
Equitable Distribution in New York
During your divorce, 'equitable distribution' becomes a crucial part of asset division, especially in New York. Equitable distribution is a distribution model that aims to divide marital property fairly, not necessarily equally, between you and your spouse. This approach recognizes that each marriage is unique, and a strict 50/50 split may not always be fair.
Factors Influencing Equitable Distribution
When dividing your retirement assets in a divorce, New York courts weigh several factors, including:
- Your age and health
- Whether there was abuse in the marriage
- Each spouse’s current income and future earning capacity
- Your income and property when you entered the marriage
- The sacrifices you or your spouse made for the other's career advancement
- Non-monetary contributions to the marriage, such as homemaking or raising children
- Whether a spouse intentionally wasted assets or transferred them in anticipation of divorce
- The length of your marriage; a longer marriage may indicate a more intertwined financial relationship
Types of Retirement Accounts
Your retirement accounts, like 401(k)s, IRAs, pensions, and deferred compensation plans, likely represent a significant portion of your marital assets. In New York, these accounts are subject to equitable distribution. The portion of your retirement assets that accrued during the marriage is subject to division.
Each type has specific rules and regulations that can make dividing them complicated. For instance, you typically divide a 401(k) using a Qualified Domestic Relations Order (QDRO), while IRAs require a different approach.
Separate retirement assets, those you can expect to keep, include:
- Assets you accumulated before the marriage
- Assets you accumulated after filing for divorce
- Assets you accumulated after the date of separation
However, if the separate asset’s value increased due to either spouse's efforts during the marriage, that increase might be subject to division.
Valuation of Retirement Assets
The value of these assets is based on the current balance, but it also must account for the asset’s projected growth.
In New York, the critical dates for valuation are:
- The date of marriage
- The date of separation or filing for divorce
Anything acquired during the marriage is subject to division, and anything acquired after separation or the divorce filing should remain separate.
Given the long-term nature of retirement savings and the potential for significant value fluctuations, you may need to engage financial experts for a fair value assessment.
Qualified Domestic Relations Order (QDRO)
A Qualified Domestic Relations Order (QDRO) is crucial in dividing your retirement assets during a divorce. This court order lets you distribute retirement plan benefits to your former spouse without incurring early withdrawal penalties or additional taxes.
In New York, a QDRO is necessary for dividing certain retirement plans, such as 401(k)s and pensions. The order must be carefully crafted to comply with the retirement plan's rules and federal laws, ensuring correct division.
The significance of a QDRO goes beyond asset division. It also ensures both spouses' rights and allows the retirement plan administrator to disburse funds legally. Without a properly established QDRO, you might face difficulties accessing your share of the retirement benefits. Make sure to work with an experienced attorney to navigate the complexities of QDROs and protect your retirement interests.
Conclusion
Retirement benefits are already complicated, but figuring out how to fairly divide them in a divorce can be baffling. Only a portion of it is eligible for division, which is the portion you accrued during your marriage. Calculating an equitable, accurate division requires professional assistance. If you have substantial retirement assets, and you are going through a divorce, make sure to work with an attorney to help you protect what is yours.
Jason M. Barbara & Associates, P.C. is here to help you navigate the complexities of dividing your retirement in a divorce. For a free consultation, call us at (516) 406-8381 or contact us online.