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Dividing retirement assets in a New Jersey divorce can be complicated

Retirement accounts can easily be the most highly valued assets in a divorce property division. Retirement accounts can be complex assets, however, and it is easy to make costly mistakes when dividing them. Knowing a little more about the basics of splitting up retirement assets in divorce can help you avoid some of the most common pitfalls and give you a realistic picture of what to expect in your divorce settlement or court-ordered judgment.

Valuing retirement assets properly, executing correct legal instruments essential

In New Jersey, the general guideline is that retirement asset contributions made during a marriage are marital property (contributions made before or after the marriage belong solely to the party making them). This means contributions made during the marriage are subject to equitable distribution upon divorce. While equitable distribution does not necessarily mean a 50-50 split, if former spouses do not come to an agreement themselves, a New Jersey judge will often simply halve retirement assets between the two parties.

Valuing retirement assets can prove to be a challenge. For pensions that pay out a monthly benefit, it is difficult to assess present value because it remains to be seen how long the spouse named on the pension will continue to work and thus what the monthly benefit will eventually be. A pension is most commonly addressed in divorce by allocating a certain percentage of the monthly benefit to the nonbeneficiary spouse. Caution should be taken to account for any potential Cost of Living Adjustments in the eventual payouts.

Of course, pensions are becoming less common retirement vehicles these days. More often, workers will make contributions to a 401(k) or IRA retirement account. The portion of an IRA or 401(k) accumulated during the marriage is marital property subject to division. But, it is important to properly value the portion of accounts acquired before marriage. This takes far more than simply deducting the value of the account at the time of marriage from its present value; the spouse contributing to the IRA or 401(k) will lose out if he or she fails to account for the passive appreciation of the assets that existed at the time of marriage.

Procedural considerations also play a role in the proper division of retirement assets in a New Jersey divorce. For instance, a Qualified Domestic Relations Order (QDRO) can be an essential document in establishing a former spouse's right to a portion of a retirement plan that is in the other former spouse's name.

No matter what the final court order or divorce settlement agreement says, retirement assets subject to the federal Employee Retirement Income Security Act will not be distributed properly according to your terms without a complete and accurate QDRO. Generally, 401(k)s, profit sharing portfolios and other corporate retirement accounts require a QDRO upon divorce, whereas IRAs do not.

Get help from an experienced New Jersey family law attorney

If you are getting divorced, make sure your golden years are secure by getting in touch with an experienced New Jersey family law attorney. Your lawyer can ensure that any plans to divide retirement assets are fair and properly structured. If you want a larger proportion of marital retirement accounts, your attorney can negotiate on your behalf to offset retirement funds in the property settlement with other types of assets. Get in touch with a New Jersey family law attorney today for help in achieving your retirement goals in divorce.