The division of retirement assets that have been accumulated by either spouse during a marriage is one of the more challenging processes of any divorce proceeding in the state of Florida. Oftentimes, when reviewing assets for a potential divorce, the husband or wife will fail to even list the retirement asset as an asset subject to distribution. They wrongly believe that because they contributed to the retirement plan in their sole name, that it is not subject to equitable distribution by the Court in a divorce proceeding. Unfortunately, they learn that in Florida, marital property includes any asset acquired during the marriage by either spouse. This includes both vested and non-vested benefits in retirement and pension plans. This means that if you married your spouse and started a job where you had the luxury of acquiring a pension benefit, even if that benefit doesn’t start paying until you’re age 62, that portion of the benefit earned during the marriage is subject to equitable distribution with your spouse. If you contribute to a 401k at work during your marriage, that portion of the 401k that is accumulated during the marriage plus any gains or losses in the account associated with that marital portion are subject to equitable distribution in a divorce.
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How does this work?
A simple example would be that of a couple married for 10 years. During the course of the marriage, a party worked and accumulated a 401k on a job started the same year the parties were married. That party worked at this job for 8 years, then quit that company to work in another field, placing the 401k benefits into a separate account in their sole name where it appreciated in value through investment accumulation. If a divorce is filed, the Court will look at the entire amount in this 401k benefits account as a marital asset subject to equitable distribution since it was earned and appreciated in value entirely during the marriage.
The calculation becomes more challenging in a situation wherein a party has been working a number of years for a company prior to getting married and accumulates a 401k benefit with the company that is non-marital. The party then gets married and continues to contribute to the same 401k for the entire time of the marriage. Now there is a portion of the 401k that is non-marital (because it was earned prior to the marriage) and a portion earned during the marriage that is marital and subject to equitable distribution by the Court. Financial experts are helpful in reviewing these facts and providing expert testimony to the Court about the percentage of the 401k that would be marital and therefore subject to equitable distribution. The Court has the power to enter a Qualified Domestic Relations Order which will Order the plan to be separated into a separate 401k account equal to one half of the marital portion of the 401k, while leaving the party’s non-marital portion along with the marital accumulation of that pre-marital portion to the party. In this manner the funds going to each party maintain their tax deferred status and no taxable event occurs unless a party decides to remove their individual funds from their account.
There are many variations of division of retirement assets between spouses. The attorneys of Morgan and Barbary stand ready to review the specific asset structure of your retirement portfolio and take the necessary steps to insure that you obtain what you are legally entitled to under Florida law.