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Your Right to Retirement Assets

Steven C. Frazier, Attorney At Law Oct. 26, 2023

Elderly man hand showing a jar full of coinsDivorce is never an easy process, and sorting out your financial situation can be one of the most difficult aspects of divorce. In order to ensure that your voice is heard and that you can start over with a fair divorce settlement, you should enlist the help of a family law attorney. Whether you’ve been served with papers or are thinking of getting divorced, call me at Steven C. Frazier, Attorney at Law in Kingsport, Tennessee. I will bring my two decades of experience to your case and will provide personalized guidance and support.  

One of the most common conundrums couples face when divorcing is the question of how to divide retirement assets. Below, I’ve compiled some basic information to help you get started as you begin the divorce process.

Division of Property in Tennessee   

First, it is important to understand how Tennessee divides property during a divorce. Tennessee is an “equitable distribution” state, meaning that the state decides how marital property is divided depending on a number of factors. “Equitable” does not mean “equal.” There is no guarantee that a judge will order assets to be split 50/50. 

The factors a judge might consider when deciding asset division in a divorce include the length of the marriage, contributions to the marriage, each spouse’s age and earning power, each spouse’s health, and whether or not one spouse gave up work or education opportunities for the other.

Only marital property is subject to division. Marital property includes any asset that was gained during the marriage, such as earnings or a jointly-bought and owned house. Separate property, or any property acquired before the marriage, is not subject to division. Inheritances and gifts are also generally separate property even if they are granted to one spouse during a marriage.

How Retirement Assets Factor In  

Types of Retirement Assets

401(k)s: 401(k)s enable employees to put aside some of their earnings into investment accounts; the money isn’t taxable until withdrawn. 

Defined-benefit pension plans: This type of plan pays out a certain amount every month to employees or union members. 

IRAs: These “independent retirement accounts” are not connected to an employer.

Military Benefits: These pension plans are given to members of the U.S. military.

Are Retirement Benefits Considered Marital or Separate Property?

The answer to this varies. For example, 401(k)s can be considered to be hybrid assets. Anything that one spouse puts into their 401(k) before a marriage is usually viewed as their separate property, but anything earned and put away during the marriage can be considered marital property. The same holds true for IRAs.

Military benefits are considered marital property in Tennessee. A civilian spouse is entitled to receive a set amount of those benefits if they have been married to their military spouse for 10 years and if those 10 years were concomitant with the military spouse’s service.  

Defined-benefit pension plans are usually harder to figure out how to divide, and you might need a pension valuation expert to assist you in calculating the plan’s value and whether any part of the plan constitutes marital property.

If you and your spouse cannot decide how to divide your retirement accounts (for example, one spouse might keep the retirement plan in exchange for another asset, or both spouses might keep their plans if they are worth roughly the same), the court will decide how the plans are to be divided.  

401(k)s: Qualified Domestic Relations Orders 

In order to split a 401(k), whether by agreement with your spouse or whether by the decision of a judge, you must apply for a Qualified Domestic Relations Order (QDRO). Your attorney can help you with this complicated process, which will often require hiring a QDRO expert. Obtaining a QDRO will prevent the split and distribution of funds from counting as an early withdrawal for IRS purposes.  

IRAs: Transfer Incident to Divorce

IRAs are divided by a process called “transfer incident to divorce.” The recipient of the transferred funds will be responsible for the taxes on any distributions they take out once the funds have moved over.

Protect Your Future With Proper Legal Assistance  

To ensure that you receive the settlement that you deserve during a Tennessee divorce settlement, call me at Steven C. Frazier, Attorney at Law, serving Kingsport, Tennessee, as well as areas throughout Northeastern Tennessee including Church Hill, Johnson City, and Bristol. I can make sure that all of the documents that you will need in order to divide retirement assets are filed properly and on time, and I can provide knowledgeable assistance and answers to any questions you may have throughout the divorce process. Call me today to make an appointment.