As you contemplate divorce, you are likely thinking about how to split your home and belongings. There are other assets you should consider, as well, including your spouse’s retirement savings.
Retirement accounts are often very valuable assets and can be essential to providing for you in your senior years. You should make sure you understand how divorce will impact this type of asset.
Is the account shared or separate property?
In California, retirement savings are typically considered marital property. You and your spouse will need to divide the funds equitably during a divorce.
In some cases, your spouse will not owe you a share of the savings. Any contributions your spouse made before your marriage are separate property, as is any interest earned on those contributions. Additionally, a pre-nuptial agreement may exclude retirement accounts.
How can you receive your share?
After a judge determines the appropriate division of your marital assets, you have three options for collecting your portion of your spouse’s account.
You can receive cash equal to the value of your stake. However, you will need to pay taxes and early withdrawal penalties on the distribution. Alternatively, you can avoid fees and taxes by waiting until retirement to receive the funds.
You also have the option to transfer your share into your own retirement account.
Because the valuation of this type of asset can be difficult, you should make sure you have a clear understanding of the factors that affect what the account is worth. Proper asset appraisal will ensure you receive your fair share during a divorce.