How Can I Protect My 401(k) During a Divorce?

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If you’re like most people, you’ve been making contributions to your 401(k) to plan for your retirement. Whether you’re a young professional or nearing retirement age, this money is crucial to ensure you can enjoy your older years. Unfortunately, many are unaware of what will happen to these funds should they divorce their spouse. The following blog explores what you should know about these matters if your divorce is pending and why connecting with a Los Angeles division of assets attorney is critical to receiving the best possible outcome for your circumstances.

Is My Ex Entitled to a Portion of My 401(k)?

When you’re going through a divorce, understanding how your retirement fund is handled is critical. In California, marital assets will be divided evenly between divorcing spouses. A marital asset is anything obtained after your legal union. However, if you opened the 401(k) before your marriage, your ex is only entitled to the funds accrued in the account you accumulated while married.

For example, if you had $50,000 in the account before getting married and the balance was $150,00 when you filed, your ex can collect half of the $100,000 you accrued throughout your marriage.

It’s also important to note that all retirement plans are subject to this division, regardless of whether or not it is an individual retirement account (IRA) you opened on your own or a traditional employer-sponsored 401(k).

What Can I Do to Protect These Funds?

Understanding the legal options for protecting your retirement account is critical to ensure you can protect the funds you’ve worked hard to obtain.

If you are not married yet, you may want to consider creating a prenuptial agreement, which can help protect your assets in the event of a divorce. Additionally, you can create a post-nuptial agreement, that functions similarly to a prenup, only it is created after you are married.

However, if you are already in the midst of a divorce, there are generally three options you can consider. The first is to offer to pay out your spouse’s share of the funds upon retirement. Your spouse may also ask for other assets of equal value instead during the divorce rather than receiving their estimated half of the plan. Finally, if they want the transfer at the time of the divorce, you should utilize a QDRO.

A Qualified Domestic Relations Order (QDRO) can help you make a transfer from your retirement account to your spouses without incurring tax penalties.

As you can see, there are many complications that can arise during these matters. Because your retirement is on the line, it’s in your best interest to connect with an experienced attorney to explore your legal options. At the Zitser Family Law Group, our dedicated legal team will do everything possible to help you fight for the best possible outcome during these complete times. Connect with us today to learn how we can assist you through these challenging times.

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