How Are 401(k)s Split During A Divorce?

If you are considering a divorce or are in the thick of one, you may be getting into the nitty gritty when it comes to asset and debt distribution. For many, this is the most time consuming and contentious part of the divorce process, particularly if it is a high-asset divorce. Many people may initially think about who will get to keep the house or how their savings will be divided, but it can take longer to realize the full extent of asset distribution. When dividing marital property, it is important not to forget about things like retirement programs, social security pensions, and other benefits. This is why it is always a good idea to consult with an attorney before starting the divorce process, to ensure that you have a full and complete understanding of what will be involved so that you can prepare.

Is a 401(k) Marital Property?

You may think that contributions made by you to your 401(k) are separate property, however, any contributions made to your 401(k) during the course of your marriage are considered to be marital property. This means that if, during the ten years that you were married, you contributed $100,000 to your 401(k), your spouse may be entitled to 50% or more of that amount. Remember that Alabama is an equitable distribution state, so a 50-50 split is not guaranteed. The judge has discretion to consider a number of factors in determining what an equitable division of assets may be.

Exceptions to Equitable Distribution of 401(k)

While contributions made to a 401(k) over the course of a marriage are considered marital property, and would be subject to equitable distribution by a judge, it’s important to remember that you do not have to let a judge decide how your property is divided. In fact, that should only be done as a last resort. If you have a prenuptial agreement that governs how marital assets or 401(k)s and retirement funds should be handled in the event of a divorce, the prenuptial agreement will dictate. Some couples stipulate in their prenuptial agreement that any contributions made to their 401(k) funds will be treated as separate property, and if that is the agreement that they included in their contract, then those terms will dictate. Even in the absence of a prenuptial agreement, couples can come to their own decisions about how property is divided. If both spouses had jobs and relatively comparable 401(k) contributions, they may decide to each keep their own and not add it to the pool of marital property to be divided.

Schedule a Consultation with Peeples Law in Birmingham, Alabama

If you are considering divorce and want to make sure that your assets are protected and that you get an equitable settlement, the experienced Birmingham divorce attorneys at Peeples Law are ready to support you and ensure that you get a divorce settlement that meets your needs and honors the time spent in your marriage. Contact Peeples Law today to schedule a consultation.