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Do you know enough about the division of retirement accounts?

| Jan 20, 2016 | Firm News, High Asset Divorce

If asked to identify the most valuable assets that married couples have to their name, chances are good that most people would identify checking accounts, vehicles or the marital home. While these are all good guesses, the reality is the most valuable asset for many married couples is often their retirements accounts, such as 40l(k)s, IRAs and pensions to name only a few.  

It’s important to understand that this is the case not just for older couples nearing the end of their working days, but also younger couples looking to ensure their financial future. Furthermore, it’s important to understand that in light of the value attached to these retirement accounts, any division undertaken as part of a divorce must proceed with the necessary caution.

What do the property division laws here in Arkansas say?

Arkansas is an equitable distribution state. What this essentially means is that while separate property — property owned by a spouse before the marriage — is not subject to division in a divorce, marital property — property acquired during the course of the marriage — is indeed fair game.

However, equitable division of marital property does not always equate to a 50-50 split. Rather, in the event a court determines that a 50-50 split would prove inequitable after considering a host of factors, it can divide marital property in a manner that it deems to be the most fair (i.e., a non 50-50 split).

How are retirement accounts typically divided in a divorce?

Retirement accounts that a couple adds to their portfolio during their marriage are obviously considered marital property subject to division. However, in the event a spouse enters a marriage already owning a retirement account, such as having an existing 401(k), this balance remains separate property.

Things become more complicated, however, regarding any appreciation in the value of this otherwise separately owned retirement account that occurs during the course of the marriage. Indeed, it could potentially be viewed as marital property in the eyes of the law and therefore subject to division.

We will continue to examine this topic in future posts, including taking a closer look at Qualified Domestic Relations Orders. In the meantime, please consider speaking with an experienced legal professional if you have any questions or concerns about complex property division. 

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