Under Indiana Law, all property owned by one or both spouses is considered marital property, including 401(k)s and other retirement assets. All of the property (and all of the debts) of the parties combined constitutes the “marital estate.” When a couple divorces, the Court is charged with dividing the entire marital (rather than each individual asset and debt) estate equitably. Note that the division is to be equitable, which does not necessarily mean equal. The Court will start from 50/50, but in certain situations a deviation is appropriate, such that one party may receive more of the marital estate than the other. Sometimes, the best way to divide property and debts fairly is for one party to receive some or all of the other party’s 401(k) as part of the divorce settlement.
How are 401(k) accounts separated during a divorce?
During a divorce, your 401(k) will be divided using what is called the marital property law. Although the law states that assets should be split equitably, it does not mean they are split evenly in half. Some states, such as Texas, have within their law books something called community property where the property would be split right down the middle. In Indiana, 401(k) accounts do not fall under this law because retirement accounts are considered marital assets. This means you may keep everything you have unless your ex-spouse has a considerably lower amount than you.
Understanding your 401(k)
Before you begin thinking about splitting your 401(k), you should first understand how much you have and what rules you need to follow according to your 401(k) plan administrator. Obtaining and sharing this information with your attorney is critical to getting the divorce process over with as quickly as possible. Taking this step can provide you with evidence of having an equal or lesser amount than your spouse, thus preventing any funds from being removed from your account.
The goal of anyone going through a divorce is to come out of the other side with as little damage as possible. Fortunately, many divorced couples will agree on a certain amount of funds to be divided. If you find yourself in this situation, you may need to file a qualified domestic relations order. This is a court order that states you will be dividing your 401(k) funds between each other.
The division of 401(k) funds can be a complex thing to go through, so it may be helpful to have the guidance of an experienced attorney by your side. Doing so may prevent any errors from being made and thus provide you with the best possible conclusion to your divorce.