For people in Minnesota, retirement funds may be among the largest assets that they have. This means that they are also some of the most substantial marital assets dealt with during property division in a divorce. In most cases, retirement accounts are considered marital assets. Of course, the amount of those funds that are considered part of the marital estate depends on the length of the marriage and how long the retirement plan has been in existence. For people married for many years before they started their retirement plan, the entire fund may be divided between the couple. People in shorter marriages may divide only the growth of the fund during the marriage, depending on their circumstances.
Many people have different types of retirement plans. Some of the most common employer-maintained accounts, like 401(k) or 403(b) plans, require a Qualified Domestic Relations Order to divide them. This court order prevents tax penalties and allows for a division that mirrors the settlement in the divorce decree. In general, a spouse receiving funds in a divorce settlement can roll them over into their own retirement plan without paying a tax penalty. Pensions and other defined benefit plans are also subject to property division, and a QDRO can be used to determine their division.
Individual retirement accounts are easier to divide in a divorce because they are not regulated as employer-sponsored plans. Only the divorce decree is necessary to make the division, and funds can be rolled over into the recipient spouse’s retirement funds without a tax penalty.
Because retirement savings are so important, dividing these funds can be one of the more complex and contentious issues in a divorce. A family law attorney may help a divorcing spouse to negotiate a fair settlement on asset division, spousal support and other matters.