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Ways to Protect Retirement Savings After a Divorce

On Behalf of | Aug 19, 2021 | Divorce

A marriage can affect almost every aspect of your life, and so can a divorce. Divorces can involve dividing real estate, splitting financial assets, dividing parenting time, and paying child and/or spousal support. Many times division includes doling out retirement funds you earned through your hard work. Divorce is hard and you might be anxious about losing retirement assets to a spouse. There are steps you can take to help make sure your spouse doesn’t receive an unfair cut of your investments.

How Retirement Funds Are Paid to a Spouse in a Divorce

If you haven’t already heard the term qualified domestic relations order (QDRO), you should hear it very soon. A QDRO determines how a Retirement System pays an ex-spouse retirement funds from a divorce. Assets the court splits in a divorce are not necessarily split 50/50, but they must be split equitably. Your spouse could receive monthly payments of a specific dollar amount from your retirement benefits, or a percentage of your retirement benefits. These payments can last until your or your spouse’s death. If you used retirement funds to purchase property such as real estate, the court could order you to transfer title to your spouse, or sell the property and split the proceeds with your spouse.

Figure Out Which Retirement Funds Are Not Up for Legal Debate

To protect retirement savings after divorce, you need to first understand which retirement funds the divorce court does and doesn’t split. If your spouse asks for retirement funds that you don’t have to split, you can deny that request with confidence.

You Don’t Have to Split Separate Property

Tennessee family law only divides “marital property” in a divorce. Generally, marital property is property you acquired during your marriage. This includes retirement benefits you earned from a job you had during marriage. It does not matter if the benefits are vested or not.

Any separate property you own is property you have the right to keep in full. Your separate property includes:

  • Property you owned before marriage;
  • Property you acquired in exchange for property you owned before marriage;
  • Appreciation of property you owned before marriage;
  • Property you received as a gift or inheritance;
  • Awards or you received for pain and suffering;
  • Compensation you received for being a victim of criminal acts;
  • Awards for future lost wages;
  • Awards for future medical expenses; and
  • Property you acquire after a court orders division of your assets in a legal separation.

If you earned retirement benefits from a job you worked before marriage, those benefits and their appreciation are your separate property. The court does not divide that property in a divorce. If you earned retirement benefits from an employer you had before you got married and you continued to work for that employer after marriage, examine your financial documents carefully. You need to understand the amount of benefits you earned before marriage to protect that amount as your separate property.

Separate Property Can Become Marital Property if You’re Not Careful

Separate retirement property can quickly turn into marital property if you commingle assets or allow your spouse to help maintain or increase the value of your retirement property.

If your spouse contributes to the value of your separate property

Married couples typically want to help each other reach financial goals. In a divorce, financial boosts you received from your spouse could turn some of your separate property into marital property. If your spouse made contributions that maintained or increased a separate property’s value, the income and increase in value become marital property.

If you commingle separate and marital property

Sometimes consolidating retirement accounts such as IRAs or 401ks from multiple employers can simplify your life. But this same consolidation can make the distribution of divorce assets more complex. If you consolidate retirement accounts from jobs you had before and during marriage and it’s too difficult to determine which funds were part of the separate property, all of your retirement funds could become marital property.

As soon as you start contemplating divorce, compile and organize all of your financial paperwork. Once you have your paperwork together, speak to an experienced family legal matters attorney and a financial professional. Legal and financial professionals can help you sort out what property is separate and what property is marital so you can effectively protect your retirement assets in a divorce.

Do Not Try to Change the Characteristics of Your Retirement Funds After You File for Divorce or Separation

Once you file for divorce or separation, the court enjoins you from transferring, assigning, borrowing against, modifying, concealing, or disposing of your assets. If you violate the injunction, a judge could find you in contempt of court. Changing the characteristics of your retirement funds could also count against you when the court determines how to distribute the marital assets. These are not risks you want to take.

Speak to Financial Professionals

Whether your case is complicated or not, one of the best ways to protect retirement savings after divorce is to speak to a financial professional. When determining who gets what in a divorce, the court uses the value of your property at the time of a divorce. This isn’t always easy math. An accountant or appraiser can do the hard math to determine the most accurate values for your separate property and your marital property. With the help of a financial professional, you can make sure that you keep the maximum value of your separate property and you don’t give too much away in the marital estate.

Contact a Lawyer to Protect What’s Yours in a Divorce

If you want to protect your retirement funds in a divorce, preparation is key. Hiring an experienced family legal issues attorney is the best way to prepare. At Batson Nolan PLC, we have a tradition of excellence and we have been in practice since 1860. Our experienced family legal issues lawyers can handle simple and complex divorce issues. We are skilled, effective, and focused on your unique needs. Contact us online or call us at 931-650-5484 for the support you need.