Divorce is a complex process that involves the division of assets accumulated during the marriage. Depending on age and length of time in the workforce, retirement savings often represent a significant portion of a couple’s financial resources.
A common concern during a divorce is whether a spouse is entitled to receive half of the retirement savings accumulated by their partner.
Equitable distribution
Unlike community property states where assets are split equally, Michigan follows the principle of equitable distribution. This means that assets acquired during the marriage are typically divided in a manner deemed fair and equitable by the court. Equitable distribution allows for a more flexible approach based on various factors.
Retirement savings accrued by one spouse before the marriage may be considered separate property and not subject to division in a divorce. However, contributions made to retirement accounts during the marriage are generally viewed as marital property and may be subject to division.
In cases where retirement accounts, such as 401(k)s or pensions, are subject to division, the court may issue a Qualified Domestic Relations Order (QDRO). A QDRO is a legal document outlining how spouses will receive retirement benefits. It specifies the amount or percentage each spouse is entitled to receive and directs the retirement plan administrator to make the appropriate distributions.
There are a few ways to keep your 401(k) intact during your divorce. In many cases, if both spouses have a retirement fund, they may each choose to keep their own. However, if one spouse has significantly more, it becomes more complicated. Keeping all or most of your 401(k) may require giving up more of the marital assets, such as the house.
If you’re considering a divorce, working with someone who can review your options and find a favorable resolution is crucial.