How Are Retirement Assets Divided in a Divorce?

In a divorce, there are usually a few sought-after assets. Retirement accounts and the marital home typically make up the largest share of marital property. When a marriage ends, what happens to the retirement assets suddenly comes into question.

Perhaps one party contributed to the accounts through work. Perhaps there is a portion of a retirement account that a spouse earned before marriage. As a divorcing spouse, you need to know what to expect for the division of these assets. Our Charlotte divorce attorneys explain.

How are retirement assets split in a divorce in North Carolina?

In North Carolina, vested and unvested retirement assets earned during a marriage are subject to division. The court uses a formula to determine what portion of the account is attributable to the marriage. If the account is contribution-based, a party may present evidence of the value of the marital portion of the account. The marital retirement assets are subject to equitable division.

What is the law for dividing retirement assets in a North Carolina divorce?

North Carolina General Statutes § 50-20.1 is the law for valuing and distributing retirement assets in a North Carolina divorce. Distribution of a pension, retirement, or deferred compensation account may be made as a lump sum, through periodic payments, or as a prorated portion of benefits. Alternatively, the court may offset the account value by awarding a spouse a larger share of another asset.

How is a pension divided in a North Carolina divorce?

The court must determine the marital portion of the pension to divide it as part of a divorce judgment. North Carolina General Statutes § 50-20.1(d) instructs the court to use a coverture fraction*. The court divides the length of the marriage up to the date of separation by the total length of employment. The resulting percentage is the portion of the pension that is marital and subject to distribution.

*Determining whether an account is subject to the coverture fraction can be tricky. It depends on how value accrues in the account. For a discussion, see Watkins v. Watkins, 10-CVD-2424 (N.C. Ct.App. 2013).

How is a 401k divided in a North Carolina divorce?

Under North Carolina General Statutes § 50-20.1(d)(1), a party may present evidence to the court about what funds in a 401k account are attributable to the marriage. Contributions, gains, losses, and the like are all factors that may play into the marital value of a 401k. If neither party presents sufficient evidence to know the calculated marital value, the court may divide the length of the marriage against the total period of contributions arrive at the marital share.**

**The value of a 401k largely depends on how much the account holder contributes to the account rather than the amount of time worked for the employer. It may be the case with a 401k account that most of the contributions take place inside or outside of the marriage – and going strictly by total time may create a windfall to either spouse. To this end, the court may receive testimony about the contributions made before and during the marriage.

How long do you have to be married to get half of the retirement in NC?

Half of the retirement earned and attributable to the marriage is divisible in NC. If the parties have been married a short time, the retirement earned during that short time is subject to division. In general, the portion of the retirement earned by a spouse solely before the marriage is their sole property regardless of the length of the marriage.

How do you split a 401k in a North Carolina divorce?

To split a 401k in a North Carolina divorce, the parties must agree on, or the court must determine, the marital value of the account. Then, the parties may agree, or the court must determine an equitable distribution of the assets. The parties may split it equally, or they may offset other assets. Equitable distribution of the assets does not necessarily mean equal.

How do you protect your 401k in a divorce?

Protecting your 401k in a divorce means understanding what portion is marital and making your case for equitable distribution. It’s common for a spouse to contribute to a 401k before and during a marriage. When that’s the case, they have the burden to explain to the court that a portion of the 401k is non-marital. This can be done by presenting evidence, including deposit and growth information. It is important to arrive at your hearing fully prepared to present this information.

What is a QDRO in a North Carolina divorce?

A qualified domestic relations order (QDRO) is the detailed court order for splitting a retirement account in a North Carolina divorce. Having a judgment that gives the basics of how the asset is to be divided is generally not enough – most plan administrators need a detailed QRDO to finalize the division. Be sure to complete this paperwork to ensure that the terms of your divorce are carried out.

Who pays the fees to process a QDRO?

The court may allocate fees equally to process a QDRO. (North Carolina General Statutes § 50-20.1(f4).)

Does a pension distribution in North Carolina include future benefits?

A pension distribution in North Carolina cannot include future contributions and service years. However, the pension division includes the cost of living adjustments on the vested benefit and gains and losses.

Can the court get creative with plan payments when dividing a pension?

When the court divides a pension, it may not require the plan administrator to make a payment that is not permitted under the terms of the plan, the program, its system, or funds. The court may award a lump sum, periodic payment, or prorated benefits.

How can an attorney help with the division of retirement accounts during a divorce?

When you get divorced, your retirement accounts are key. Knowing how the court views them in divorce can help you prepare. An attorney can help you evaluate your accounts and understand how the court may divide them. They can gather the evidence needed to include the accounts in your divorce proceeding and allow the court to arrive at the proper amount for distribution.

Divorce Lawyers for Retirement Asset Division

If you are getting divorced, our experienced family law lawyers are here to provide top-notch representation. We are prepared to handle your needs and help you on your legal journey. Get in touch with us today.

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