We are working remotely during these trying times to make sure we can still support you in all your legal matters. Please know you can call us or schedule online appointments for any of your legal matters. Be well and stay safe.

WHERE YOUR FAMILY MATTERS.

Call Us Today: 732-491-8817

Fax: 732-440-7174

Call Us Today: 732-491-8817

Fax: 732-440-7174

How is one party’s 401(k) divided in a New Jersey divorce?

On Behalf of | Dec 4, 2020 | Asset Division

Married people who are fortunate enough to be able to save for retirement want to live comfortably after they stop working. Likewise, someone considering divorce does not want to worry about losing out on retirement money to stop them from ending a marriage that is no longer working for them.

One of the most common tools for retirement planning is the 401(k) account. So when it comes time to divorce, many married people ask what will happen to their 401(k). This is an especially big issue for people in marriages where one spouse works and the other is the primary homemaker and child-rearer.

401(k)s and property division in New Jersey

Like most states, New Jersey uses the equitable distribution system for property division in divorce. All assets that count as marital property must be divided in a fair manner between the spouses. Note that the law does not require an exact 50-50 division of assets. In general, assets that you and your spouse acquired during your marriage count as marital property, though there are exceptions. This can include bank accounts, family homes, and retirement investments like 401(k)s.

Things could get somewhat complicated if one spouse brought their 401(k) into the marriage. Say the breadwinner spouse had a 401(k) account worth $100,000 when they and the other spouse got married. Ten years later, the couple gets divorced. By then, the 401(k) is worth $200,000. Generally, the breadwinner spouse would get to keep the first $100,000 as nonmarital property. But the $100,000 that accrued during the marriage would be marital property. Each spouse would be entitled to an equitable share — even though only one spouse “earned” the money.

That is because the law recognizes the value of the work that a homemaker contributes to the household. Taking care of the house and being the primary parent allows the income-earning spouse to concentrate on their career. Therefore, the spouse who did not earn an income should not be shut out of the proceeds of the marriage’s financial success once the marriage ends.

Working out a fair and sustainable property division settlement

Equitable distribution allows divorcing people to get creative. If you and your ex can negotiate in good faith — with the help of your divorce attorneys, of course — you may be able to reach a settlement that leaves both of you in a strong financial position, both now and long-term.