401ks & Dividing Retirement Accounts in a Divorce

Written by Jonathan Breeden

June 11, 2021

No one ever gets married, expecting their marriage to end in divorce. But when your marriage turns sour or you simply no longer want the same things in life, it is important to protect yourself. It is not unusual for divorces to become tumultuous. Spouses may disagree on certain things like alimony and about how other marital property will be divided.

When it comes to your retirement savings accounts and 401ks, this division can be particularly complex. And if you aren’t careful, your soon-to-be-ex could take more than they deserve. Of course, these assets should always be discussed with an experienced North Carolina divorce attorney. Still, generally, this is what you can expect when your retirement savings is part of your divorce settlement.

How Marital Property & Assets are Divided

Every state has rules determining how marital property, debts, and assets are divided in a divorce. When you first think of divorce, you may be worried that your ex could be entitled to half of everything you have – including your retirement accounts and 401ks. This would be true if North Carolina were a community property state.

But NC follows equitable distribution laws. Essentially, this states all marital property and assets should be divided fairly in a divorce. But that does not necessarily mean equally. The Court often tries to divide the total net marital estate equally, but it does not have to do it.

There are several factors taken into account to divide these assets and debts fairly. Some include:

  • The length of the marriage
  • Each spouse’s expenses and income
  • Each spouse’s contribution to the marriage
  • The amount of the retirement earned during the marriage
  • The debts of the marriage that one party may be taking more than half of child custody

While you can protect your retirement savings from your ex-spouse, it doesn’t mean that some concessions won’t have to be made. For example, if you are a spouse seeking a portion of your marital retirement savings and 401ks, you can also seek your fair share.

A Qualified Domestic Relations Order

If you or your spouse thought you could just pull money out of your 401k on a whim, you’d be surprised to learn that you need a court order to do so. First, a judge will need to sign a Qualified Domestic Relations Order. This legally binding document confirms that one or both spouses have the right to a portion of the funds in the accounts.

It states, to the exact dollar amount, how much the spouse in question will get. Your divorce settlement will need a QDRO to be finalized. Unless, of course, you come to an agreement that does not involve one spouse retaining any portion of your retirement savings, pensions, employer-sponsored plans, or 401ks.

Distributing Your Retirement and 401k

The last thing you want is for the Court to decide how your hard-earned retirement fund will be divided. Once the amount you are entitled to has been determined, there are a few ways to get your retirement and 401k accounts distributed. You have the option of:

  • Rolling your assets into your own retirement plan
  • Deferred distribution
  • Cash-out your portion of the balance

Each of these may come with its own penalties. Therefore, you will need to consider the impact of each before deciding how you want to gain access to your fair share of your marital retirement savings and 401ks.

Contact a Divorce Lawyer in North Carolina

When you are ready to dissolve your marriage, you need to protect what’s in your 401ks and retirement accounts and get help from a North Carolina divorce lawyer. Breeden Law Office can help you negotiate your divorce settlement, so you are awarded what you are entitled to.

Don’t let yourself get taken advantage of.

With over two decades of experience and local offices in Raleigh, Garner, Angier, and Smithfield, call attorney Breeden at (919) 661-4970. He’s ready to listen and discuss how he can help you and your family.


Divorce In North Carolina: What You Need To Know

A book by Jonathan Breeden