For many, a person’s retirement accounts—as well as their house—constitute the lion’s share of their wealth. It is the sum of their hard work and thoughtfulness, their plan for the future, their “nest egg”. It is also their financial security. One of the reasons that divorces become so heated is because people feel that financial security threatened and replaced by the unknown. At New Direction Family Law, our team of experienced attorneys understands this and strives to provide clients with the information, guidance, and advocacy necessary to protect this sense of security.
Equitable Distribution Makes Retirement Accounts Fair Game
Couples who divorce in North Carolina have a right to an “equitable distribution” of all property acquired during their marriage. To do so, it takes the fair market value of all “marital property” then divides it between the spouses following numerous statutory factors. Except for inheritance or gifts received by a spouse, marital property includes all income, earnings, and property acquired between the date of marriage and date of separation.
Significantly, retirement accounts, plans, and pensions all count as marital property, to the extent that it was earned between the couple’s date of marriage and their date of separation. For retirement accounts that begin during the marriage, the entirety of those accounts is marital property.
It becomes more complex for retirement accounts that existed before the couple’s marriage. For these accounts, courts must determine the fair market value of the pro-rated portion of the retirement accounts that were earned during the marriage. Depending on the types of accounts, the amount of money at stake, and the complexity of prorating the accounts, your attorney may partner with a financial expert to protect your interests.
When the marital property portion of a retirement account has been determined, couples and courts have a couple of options: (1) divide the retirement proceeds between the couple via a lump sum or periodic payments; or (2) forgo dividing the retirement accounts and replace the value with other property.
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
When we help clients resolve the end of their marriages, we keep their retirement and financial health at the forefront of our minds. At New Direction Family Law, our attorneys have decades of combined legal experience, which we use to offer smart, effective service to our clients. With a proven track record and a client-centered focus, we fight for our clients’ their best outcomes so they can move into the future. Let us assist you. We serve women and men in Wake, Johnston, Durham, and surrounding counties. Contact New Direction Family Law at (919) 719-3470 to schedule an appointment, or visit us at our website.