Nest Egg

Understanding Your Rights to Retirement Assets

Michael Fink Law, PLLC March 7, 2022

Property division remains a vital aspect of every divorce case. Just like you divide your marital property and assets, you're also expected to divide the retirement benefits, including a 401(k) and pension plans, with your estranged spouse. However, taxes and legal implications make dividing retirement assets even more complicated. An experienced Minnesota family law attorney can educate you about your rights to retirement assets in your divorce and help you make intelligent decisions.

At Michael Fink Law, PLLC, I have the diligence, resources, and skills to help individuals and families navigate complex divorce issues, including the division of retirement benefits. I'm available to discuss your unique circumstances and enlighten you about your various legal options. Also, I will fight diligently to protect your best interests and help divide the retirement assets equitably and fairly. My firm is proud to serve clients across Minneapolis, Minnetonka, St. Louis Park, Edina, and St. Paul, Minnesota.

Equitable Division of Marital Property

Marital property, also known as community property, includes all assets and debts accumulated or incurred by the couple during their marriage. This includes the marital home, motor vehicles, furniture pieces, income, royalties, bank accounts, rents, stocks, pension plans, 401(k) accounts, credit card charges, and all other assets accrued during the couple's marriage.

Furthermore, Minnesota is an “equitable distribution” state. Under state laws, marital property must be divided "equitably and justly" between the spouses. Though, equitable doesn't always mean "equal," but rather, fair. The following factors will be considered by the court to achieve equitable property distribution:

  • The length or duration of the marriage

  • The age, health, and occupation of each spouse

  • The amount and sources of income of each spouse

  • Any prior marriages

  • Each spouse's vocational skills and employability

  • The estate, liabilities, and needs of each spouse

  • The opportunity for future acquisition of capital assets and income

  • The contribution of each spouse in the acquisition, preservation, appreciation, or depreciation of the amount or value of the marital property

  • The contribution of a spouse as a homemaker

  • Any other factor deemed necessary by the court to achieve equitable distribution

A knowledgeable property division attorney can walk you through the asset division process and help you understand how retirement benefits might factor in.

How Retirement Assets Factor In

When dividing retirement assets in a divorce, the types of retirement plans will determine the distribution rules that will apply. The different types of retirement assets include:

  • Defined-benefit plan

  • Defined-contribution plan

  • Military benefits

  • Government pension

  • Saving accounts

  • Traditional retirement plans, such as 401(k), IRA, and annuities

Any amount contributed to the retirement accounts during the marriage, including employer-sponsored retirement plans, will be part of the marital property. As long as there is no prenuptial agreement stating otherwise, you're lawfully entitled to part of the balance. An experienced divorce attorney can help you seek a Qualified Domestic Relations Order (QDRO) to protect your share of the retirement accounts.

Qualified Domestic Relations Order (QDRO)

A Qualified Domestic Relations Order (QDRO) is a court order that details how the retirement amounts will be distributed between the spouses. Once the court determines the actual balance available in the retirement accounts, your attorney can draft a QDRO to instruct the retirement plan administrator about how to pay you your share of the retirement benefits.

Also, the QDRO prevents your spouse from withdrawing the funds or your spouse's employer from paying out the retirement benefits directly to your spouse. A skilled family law attorney can help you draft the QDRO and enlighten you about the tax and legal implications of dividing retirement assets.

Tax Implications of Dividing Retirement Assets

Generally, retirement transfers are tax-free. However, the types of retirement plans, among other factors, will determine the tax implications. Dividing your retirement accounts before reaching the age of retirement is considered an early distribution. This may be subject to a 10% penalty fee.

Nonetheless, if you distribute the retirement benefits in accordance with the provisions of the divorce decree, you won't be charged any withdrawal fee. Consulting with an experienced family law or tax attorney is crucial for detailed guidance and to help you navigate key decisions.

How Legal Counsel Can Help

Retirement benefits and assets are among the most valuable assets many individuals own. As a result of the tax implications, splitting retirement savings in a divorce can be difficult and may involve several complexities. Therefore, if you are considering filing for divorce and want to understand the division of retirement benefits, consulting with a knowledgeable family law attorney is crucial for proper guidance.

At Michael Fink Law, PLLC, I'm dedicated to offering experienced legal guidance and reliable advocacy to clients in family law matters, including divorce and property division. As your legal counsel, I will work to understand your specific situation, calculate the amounts you contributed to the retirement accounts, and determine the best way to achieve equitable distribution.

Also, I will enlighten you about how the QDRO process works and how it may affect your retirement plans. Using my extensive experience, I will work intelligently with qualified experts, including financial analysts and tax professionals, and all other parties involved to divide retirement assets fairly and resolve other divorce or property division issues amicably.

Contact my firm – Michael Fink Law, PLLC – today to schedule a simple consultation with an experienced property division attorney. I can offer you the personalized legal counsel and brilliant advocacy you need to navigate key decisions in your divorce. My firm proudly serves clients across Minneapolis, Minnetonka, St. Louis Park, Edina, St. Paul, Minnesota, the entire Twin Cities metropolitan area and Greater Minnesota.