North Carolina divorces force people to make some difficult decisions. Spouses have to divide their property in a way that is fair. Many people worry about protecting their interest in the home that they purchased or minimizing how much debt they have to pay after the divorce.
In some cases, spouses may also worry about financial resources that they have set aside for their comfort later in life. Retirement savings can often be worth as much or more than the marital home where a couple lives together. Unfortunately, the value of retirement resources can make them a source of contention during divorce negotiations or litigation.
Which spouse typically retains a couple’s retirement savings after the divorce?
Spouses may need to share their savings
Many retirement savings accounts relate to an individual’s employment. They may have a 401(k) that they started funding when they began a new job after college. People sometimes make the mistake of assuming that an account held in the name of one spouse is their separate property.
However, any deposits into the account during the marriage likely involved marital income and are therefore part of the marital estate. In some cases, the entire balance of a retirement savings account may be marital property that is subject to division. Other times, part of the account may be separate property if the account holder made deposits before getting married or after officially separating from their spouse.
Each spouse may receive a portion of the account after the divorce. It is possible to divide retirement savings accounts without taxes and penalties if people use qualified domestic relation orders (QDROs) drafted in accordance with the property division decree. Each spouse can receive a specific portion of the account’s balance.
Other times, spouses may negotiate arrangements in which one spouse retains the entire balance of their retirement savings account while the other receives different assets worth a comparable amount. It is also theoretically possible to balance out the value of retained retirement resources with responsibility for debts accrued during the marriage.
People who are familiar with the North Carolina approach to property division can assert themselves and ensure they obtain their fair share of the marital estate during a divorce. Learning more about what happens with specific assets can help people prepare for the end of a marriage.