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Diamond & Diamond, P.A.
NJ FAMILY LAW ATTORNEYS

HIGH-QUALITY REPRESENTATION
IN DIVORCE AND FAMILY LAW
MATTERS

Diamond & Diamond, P.A.
NJ FAMILY LAW ATTORNEYS

HIGH-QUALITY REPRESENTATION
IN DIVORCE AND FAMILY LAW
MATTERS

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Dealing with a 401(k) in a divorce

| Dec 23, 2020 | Division Of Assets |

As you prepare for your divorce proceedings in New Jersey, you begin to contemplate the need for developing a strategy relative to the division of your marital assets. While not necessarily focused on a “zero-sum game” outcome (the law mandates the equitable division of your assets), that strategy should consider which assets will be subject to property division.

It may come as a surprise to you to learn that 401(k) accounts fall into this category. While such accounts typically exist through one’s individual employment, the contributions made to them during your marriage come from marital income (thus making them marital assets). Knowing that, your attention should then turn to understanding how the court typically divides such an asset.

The typical treatment of a 401(k) in a divorce

In most cases, the court will issue a Qualified Domestic Relations Order in your case. This allows a 401(k) plan provider to make a disbursement to an alternate payee (in this case, whichever of you or your ex-spouse is not contributing to the account). With that authorization, the provider usually divides the account into two separate accounts. You and your ex-spouse then assume control over your respective accounts (with each of you empowered to implement your own investment strategies).

Alternative options

These are not the only options available to you when dividing up a 401(k) in a divorce. Either of you can cash out the portion owed to you (doing so during a divorce case does not net a penalty). Also, if you are the 401(k) account holder, the 401(k) Help Center states that you can attempt to retain its full amount. To do so, you simply need to relinquish your stake in another marital asset of comparable value.