Can a Divorce Affect My Retirement Funds?
Property division is a contentious issue in divorce, and it affects some retirement funds.
Divorces among older people and retired people are becoming even more common these days and one of the most debated issues in these cases can be retirement funds. Younger individuals who are getting a divorce should also think about the division of retirement funds, but usually these individuals have more time to rebuild their retirement savings. So, if you are going through a divorce, what do you need to know about how it will affect your retirement funds?
Are Social Security Benefits Considered to be Marital Property?
In Franklin and the rest of Tennessee, only marital property is divided at the time of divorce. Marital property is all property of any kind acquired during the course of the marriage by either or both spouses up to the date of the final divorce hearing. It includes vested and unvested pension benefits and stock option rights, and retirement and other fringe benefits accrued as a result of employment during the marriage, and contributions during marriage to retirement accounts that began before marriage. A Tennessee statute says that money received from Social Security disability actions for wages lost during the marriage is marital property. Other things can also be considered marital property. Separate property, on the other hand, includes assets and liabilities that a person acquired before the marriage and brought into the relationship with them, and can also include IRAs before marriage, and property that is received as gifts and inheritance.
Federal law provides that Social Security benefits paid or payable are not transferable or assignable, except for purposes of collecting child support or alimony. Therefore it is understood that the benefits are not divisible as marital property by the divorce court. (But note the Tennessee law mentioned above regarding recovery in Social Security disability actions.)
Pursuant to social security regulations, an ex-spouse who was married at least ten years is eligible for social security spousal benefits on the other spouse’s earning record. They will also have to look at the amount of benefits drawn on their own earning record, and will draw on the record where their monthly payment will be larger. The ex-spouse with the higher earning record will not experience a decrease in his/her own benefits as a result.
In dividing marital property, one of the factors the court must consider is the amount of social security benefits available to each spouse.
Benefits under retirement plans which are marital property are routinely divided in divorces. This can also be the case even when the fund was acquired before a spouse entered the marriage.
How are Retirement Funds Divided During Divorce?
Even when a retirement fund, such as a 401(k), is acquired by one spouse before the marriage, the funds within it may still be subject to property division laws. This happens when contributions continue to be made to the retirement fund after the date of marriage as an ongoing investment that is accumulated over the years. When a spouse has a retirement fund before they get married, any funds accumulated before the marriage, plus the appreciation in value of those funds, are considered separate property. On the other hand, any funds contributed after the marriage, plus appreciation in value of those funds, are considered marital property.
For example, a husband may have a retirement account worth $20,000 before he gets married. After being married, he gets divorced 15 years later, at which point his retirement fund has amassed $200,000. The portion of the fund obtained before the marriage (i.e., $20,000) plus the amount of appreciation in value of those funds throughout the marriage up to the time of divorce, is separate property. Reasonable methods of accounting can be used by the court to determine what that amount of appreciation is. The remaining amount of the retirement account would be considered marital property subject to property division law, to be divided fairly although not necessarily equally.
Divorce Can Affect Your Retirement
If you have a retirement fund, or a portion of a fund, that is considered marital property, it can significantly impact your retirement plans. You may have thought you and your spouse would live in the same household, which could help offset the costs of housing in retirement. You may have even planned to combine your Social Security benefits. A divorce can derail these plans and even delay retirement. Therefore, it is important to work with a Franklin family lawyer who can help you retain as much of your retirement fund as possible.
I am a Family Lawyer in Franklin Who Can Help With Your Property Division Issues
Your retirement fund is important to you, and you should not overlook its importance in divorce. I am Judy A. Oxford, Attorney at Law, a Franklin family lawyer who can help with property division issues to try to help you retain what is very valuable to you. Call me at 615-791-8511 or contact me online to schedule a consultation and obtain sound legal advice you need.