You’ve worked hard to raise your children. You put your career on hold to be a stay-at-home mother while your husband worked. This was an agreement that the two of you decided on together. A lot of thought and planning went into it, because you had your own career aspirations.
Now you and your husband have decided that your marriage isn’t working. You’ve tried couples counseling, date nights and new negotiations. While the two of you tried, you’ve decided it’s best if you separate. As you plan for the divorce process, you worry about your children, finances and future.
Your husband has been the one working. His retirement funds are the nest egg you both were depending on. Now what do you do?
Are you entitled to any of your husband’s retirement money?
It’s likely that your husband’s retirement accounts are considered marital property. He has been working and acquiring the money while you have been married. If any of the money was earned prior to marriage, that could be considered separate property. You will need to take the right action to ensure that you get your share of the funds.
His individual retirement Plans
Traditional IRA and Roth accounts are typically divided through a trustee transfer. When dividing an individual plan, it is important to carefully examine each step. If the transfer is conducted incorrectly, you and your spouse could be hit with early withdrawal penalties.
Plans through his employer
Workplace plans, such as a pension or 401 (k) plan are handled differently. In order to get your portion of the money you must fill out a Qualified Domestic Relations Order (QDRO). You can have the money transferred into your own IRA, or be paid directly. Again, it is important to work with a professional to ensure paperwork and processes are followed correctly to avoid costly penalties.
What else should you consider?
Taxes. There are taxes involved, and you will want to take steps to minimize the taxes. New York follows equitable distribution practices. This means the courts use a formula to calculate how the retirement fund will be divided.