Do You Have To Split Your 401(K) In A Divorce?

If you have a 401(K), then most likely some or all of the funds in those accounts are considered a marital asset and your spouse is entitled to his/her marital share. So, the short answer is “MOST LIKELY YES”, a 401(K) is a marital asset that has to be shared.

While you are married, any funds that you accumulate in a 401(K) account are considered a marital asset. However, as with any asset, instead of splitting the 401K account, the parties can decide to waive those funds or substitute the amount owed with some other assets of equal value.

When getting divorced, a 401(K) account is analyzed as follows:

#1: Did the 401(K) account exists prior to the marriage date?

#2: If the answer to #1 is “NO”, then all the funds in the 401(K) are considered marital funds.

If the answer to #1 is “YES”, then the next question is: “Is there any documentation or evidence that demonstrate how much was in the 401(K) account at the time of the marriage (or close to the marriage date)?

If you can demonstrate how much was in the 401(K) account at the time of the marriage, then those funds are considered that person’s separate property and are excluded from the other spouse.

If you can NOT demonstrate how much was in the 401(K) account at (or around) the time of the marriage, then all the funds in the 401(K) account will be considered a marital asset.

#3: The “cut-off” date – meaning the date that any NEW monies/funds in the 401(K) account will no longer be considered a marital asset – is either: (i) the date the divorce was started; (ii) the date that a separation agreement or other agreement sets as the “cut-off” date; or (iii) by selecting a different date in the divorce agreement.

#4: The funds or monies that accumulated in the 401(K) during the marriage and before the “cut-off” date are absolutely considered marital funds. 

Once you know how much of the funds in the 401(K) are considered marital funds, then each spouse is entitled to 50% of those marital funds. Most of the time, each spouse will take their share and the funds will be split between the parties. In some cases, instead of splitting the funds in the 401(K) account, another asset can be used to substitute for the amount of funds in the 401(K) account. However, it is important to remember that the funds in the 401(K) account are worth less than the current value in the account. This is because the funds in the 401(K) account have a taxable component.

The bottom line is that YES, you most likely have to split the funds in your 401(K) account.

David Badanes and the Badanes Law Office have helped their clients in deciding how to handle their 401(K) accounts in their divorce. If you need an attorney to represent you in your divorce, call David Badanes, Esq. and the Badanes Law Office, P.C. today at 631-239-1702 or email me at david@dbnylaw.com. The Badanes Law Office has offices in Northport and Uniondale.

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