If you are going through a divorce and have a retirement account, you may be unsure of what will happen to it. If you are hoping that this account will sustain you through retirement but your spouse has a claim to it, then it could throw off your future plans.
Fortunately, you can prepare for retirement-related issues during your divorce.
Understanding how you’ll divide your assets
Maryland is an equitable distribution state, which means that you and your spouse should divide all marital property equitably (not necessarily equally) when you divorce. In terms of your retirement account, this could mean that:
- Anything you put into the account prior to your marriage is protected
- Anything you put into the account during your marriage may be considered marital property
- Any gains made on the account, such as interest, may be considered marital property
Your spouse may be entitled to a share of your retirement, but that share won’t necessarily be half of everything it holds. In some cases, you may be able to negotiate with your spouse to prevent them from accessing your retirement account at all.
Equitable distribution just means that your entire marital estate needs to be divided equitably. So, if you have an estate valued at $400,000 with one $200,000 home and a $200,000 retirement account, you could opt to keep your retirement account and to negotiate the home as the trade. If your spouse is entitled to 40% or 30% of the value of the marital estate, then you will need to calculate their share’s value and then work out how to give them that portion of the estate. For instance, if they are to receive 25% of the value of a $400,000 estate, they’ll receive $100,000 of property or assets. You might sell your home and give them $100,000 out of that sale, or you might split your retirement to keep $100,000 as well as your property.
Good negotiations will help you in these circumstances. Everyone’s situation will be different, so it is valuable to look into the assets you have, their value and the steps you can take to protect your retirement.