Steps To Dividing Retirement Assets


Retirement accounts, much like any other asset, can qualify as marital assets, regardless of whose name is on the account. However, dividing this type of asset is difficult. For one, any withdrawals from a retirement account could be subject to taxes and an early withdrawal penalty, so dividing the asset in an inappropriate manner could reduce its value—quite substantially.

Fortunately, the attorneys at Lawrence Law Office have helped many of our clients divide their retirement assets. Contact us today to discuss your case.

Step 1: Value the Retirement Asset

There are generally two types of retirement accounts:

  • Defined contribution
  • Defined benefit

Of the two, defined contribution is the easier to value. A worker owns this account in his or her name and makes investments. It is usually easy to check the current value by looking at the account. Some assets need to be “tax-adjusted” so that they can be compared properly to other after-tax assets.

A defined benefit plan is different. Many pensions are defined benefit plans. The value of this type of plan depends on many factors, such as the number of years a worker has been at the job, the worker’s salary history, and other considerations. It is vital to work with an experienced divorce attorney who fully understands how to value a defined benefit plan.

A note: Social Security benefits are not divided in a divorce. Instead, they are exempted from the division of marital property.

Step 2: Identify What Portion is Marital

Retirement assets can be confusing to divide for several reasons. For one, you need to figure out what percent of the retirement account is marital. If you opened the account after marriage, then typically the entire account is marital. However, not all retirement plans are straightforward.

For example, you might have opened a 401(k) or Individual Retirement Account when single. After marriage, you continue to make investments every month or year. In this type of situation, some of the accounts are probably marital, while some are separate property.

Our lawyers will analyze the following to determine the marital portion:

  • When the account was opened
  • How much was deposited when the account was opened
  • When investments were made and for how much
  • The date of your marriage
  • The existence of a valid prenuptial or post-nuptial agreement

Spouses typically disagree on this issue, in which case a judge needs to decide how much of a retirement asset counts toward the marital estate.

Step 3: Divide Benefits

A couple can decide how they want to divide their marital property. For example, a couple might decide to divide everything 50/50 or they could come up with some other percentage. They will need to put all marital assets into a pot and then divide them between the two.

If a couple disagrees on the division, a judge divides the property according to Ohio law. Under ORC 3105.171(C)(1), a judge should divide marital property equally, unless doing so would be unfair. A judge can look at many factors, such as the length of the marriage and each spouse’s separate property and debts, to arrive at a fair distribution of assets.

Because retirement accounts are included in the pot with other marital assets, it’s possible to leave the marriage with your entire retirement account. For example, your account might be worth $200,000. Your home is worth $300,000 and you have $100,000 in cash. If marital assets are divided 50/50, then your spouse could get the home and you could leave with your retirement account and the cash. This is a simple example, but it illustrates an important point: it is sometimes possible to avoid having to split the retirement assets.

Step 4: Transfer Ownership of Some or All of the Asset

If a retirement plan must be divided, then you will need a court order, which could take different forms. One common order is a Qualified Domestic Relations Order or QDRO. This order instructs the administrator for the retirement plan to transfer ownership of some or all of an account. If there is a public retirement plan at issue, then our clients typically need a Division of Property Order or DOPO.

Obtaining a court order is a necessary step, otherwise, the plan administrator can ignore the request. This is one reason to work with an experienced Ohio family law attorney.

Contact Our Firm Today

You have worked hard for your retirement, and divorce should not disrupt your plans. At Lawrence Law Office, we understand the division of retirement assets inside and out and can work to protect your rights. Contact us today to schedule your initial consultation with a member of our team.