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What happens to retirement plans in a high asset divorce?

Some Maryland residents spend their entire career – several decades or longer – saving for retirement. By the time they retire, they may have amassed a large sum of money – perhaps millions of dollars. But with the recent trend toward divorce late in life, this money may not be totally secure. Retirement plans such as pensions, stocks and 401(k)s are considered assets in a divorce, so these accounts are subject to division. This means that the other spouse may be able to claim his or her fair share should the marriage end. Read on to find out more about what happens to retirement plans in a high asset divorce.

Assets are split based on state law. Retirement plans are split the same as any other asset. In Maryland, assets are split equitably, so the judge will make a determination based on what he or she is fair. It may not be a 50-50 split. In fact, if both spouses are fairly financially secure or have similar amounts of money in their retirement plans, then the plans may not even need to be divided.

The recipient may have access to the money immediately, depending on the plan and benefit amount. More than likely, though, he or she will have to wait until the other spouse’s retirement or death before collecting benefits. In any case, the one who owns the account will have to file a Qualified Domestic Relations Order. This is a decree that orders the plan to pay out all or part of a benefit amount to a spouse, child or other recipient.

Being forced to divide retirement assets is an unfortunate situation for those who have spent many years saving their hard-earned money. The good news is that it is often possible to protect assets with a prenuptial agreement.

Source: Internal Revenue Service, “Retirement Topics – Divorce,” accessed on May 16, 2015

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