For many individuals, their retirement accounts and homes constitute the cornerstone of their wealth—a product of hard work, careful planning, and the cherished “nest egg” for the future. These assets also represent their financial security. When facing a divorce, emotions often run high as people fear the uncertainty that threatens their financial well-being. At New Direction Family Law, we empathize with these concerns and acknowledge the importance of safeguarding your sense of security. Our team of experienced attorneys is dedicated to providing you with the essential information, guidance, and advocacy needed to protect your financial interests throughout this challenging process.
Equitable Distribution Makes Retirement Accounts Fair Game
In North Carolina, couples going through a divorce are entitled to an “equitable distribution” of their property acquired during the marriage. This process involves determining the fair market value of all “marital property” and dividing it between the spouses based on statutory factors. Marital property includes income, earnings, and property acquired from the date of marriage to the date of separation, excluding inheritance or gifts.
Retirement accounts, plans, and pensions are considered marital property to the extent they were earned between the date of marriage and date of separation. For accounts initiated during the marriage, the entire value is considered marital property.
For accounts existing before the marriage, determining the fair market value of the prorated portion earned during the marriage becomes more complex. Courts need to calculate the value of the retirement accounts earned during the marriage. In such cases, your attorney may collaborate with a financial expert to safeguard your interests, considering the account types, amount at stake, and complexities of prorating.
Once the marital property portion of a retirement account is established, couples and courts have two options: (1) divide the retirement proceeds through lump sum or periodic payments; or (2) replace the retirement account value with other property.
Navigating the equitable distribution of retirement accounts in a divorce requires careful consideration and professional guidance to ensure a fair and equitable outcome.
Qualified Domestic Relations Order (QDRO)
To effectuate an order dividing retirement and pension plans between beneficiaries, a specific order is required. A Qualified Domestic Relations Order (QDRO) is an order that informs the administrator of a retirement plan that another person has a right to receive distributions from an account. Further, it orders that plan administrator to make specific lump sum or periodic distributions at the appropriate time.
Exception: Is There a Prenuptial Agreement?
An exception to the general laws of equitable distribution is if the couple has an existing prenuptial agreement that was properly entered before their date of marriage. A prenuptial agreement is a legally binding contract that allows couples to choose to preemptively determine what happens to property should the marriage end. It is common for these agreements to keep retirement plans as separate property.
Let New Direction Family Law Assist You
At New Direction Family Law, we firmly believe that a divorce should not jeopardize your financial health or retirement plans. With a strong commitment to our clients’ well-being, we bring together a team of highly experienced attorneys with decades of legal knowledge. Our approach is centered around offering holistic and effective solutions tailored to your unique circumstances. Serving those located in Wake, Johnston, Durham, and surrounding counties, contact New Direction Family Law today at (919) 646-6554 to schedule an appointment, or visit us at our website.