Most Wisconsin couples plan on sharing retirement accounts and as a result, the accounts are put into both their names. The emotional toll of a divorce can be so much in a divorce that the couples forget about things like 401(k) retirement accounts and other employee benefits that would’ve been shared.
When you’re going through a divorce, any retirement accounts that the couple shares or would have shared will be brought into divorce discussions. Most retirement accounts are considered assets that can be split.
How are retirement accounts split upon divorce?
The court will take several things into consideration when deciding how to split 401(k)s between a divorcing couple. Some of these things include:
– How much is in each 401(k) account
– Who contributed more to the 401(k) account
– Who has more savings and assets in their name overall
– If it’s marital property that can be split evenly
An important part of splitting any asset is figuring out how much the asset is worth. In the case of 401(k) accounts, both parties will want to look at their individual accounts and see how much is in each account.
There also might be rules about splitting 401(k) accounts that can make the process complicated. Regardless of if your 401(k) plan administrator lets you access the balance of your account, it can still be pulled into the divorce and split between you and your soon-to-be ex-spouse.
How are taxes taken into consideration?
Another part of the process that complicates things are taxes. Most 401(k)s are tax-deferred, which means they’re only taxed once you take distributions from the account. There are different kinds of 401(k) accounts that have different tax rules. During the divorce process, your lawyers might look up the rules regarding taxation so no one ends up with surprise bills.
If you’re not willing to offer up your 401(k) to your ex-spouse, you might be able to offer a comparable asset such as a car or house. Talk with your lawyer to learn all of the options available to you.