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Equitable distribution of retirement assets in divorce

On Behalf of | May 6, 2023 | Family Law |

When you get a divorce, you should know how the courts will divide your assets. Community property states require that all marital assets get divided equally between you and your spouse. However, equitable distribution states require an equitable, not equal, distribution of all marital property.

Because Pennsylvania is an equitable distribution state, you should understand how the courts may divide your retirement asset.

Separate versus marital property

Separate property includes all the assets you acquired before you got married. Therefore, every dollar you contributed and all the interest or dividends you earned on your retirement before your marriage are separate assets. They remain yours.

Marital property includes anything you purchase during your marriage. Every dollar you contribute to your retirement and all the interest and dividends you earn after you get married are marital property. The judge distributes these assets.

Equitable distribution

Equitable distribution does not require equal distribution. Instead, the judge will divide your assets based on your circumstances. For example, if your spouse also contributed to a retirement account during your marriage, the judge will subtract this amount from the distribution process.

A judge has discretion in dividing these assets. If your spouse has significant assets, the judge may not touch your retirement. The court may also allow you to keep your account if you give up other marital assets.

Protections

With some plans, you and your former spouse can receive distributions at retirement, so the judge may not force a division immediately, requiring that you cash out the account. You may also qualify for a QDRO, which reduces your penalties for any money you have to withdraw due to divorce.

For the best results, negotiate with your spouse to keep your retirement intact.