While many spouses are worried about the marital home during divorce, one of the most valuable assets a couple may have is their retirement accounts. Spouses may have contributed or amassed funds for years in accounts, including 401(k), IRA, pension, and other retirement accounts. How these accounts are distributed or divided during a divorce can impact your long-term future.
Here is what you need to know about dividing retirement accounts during a divorce.
Classification of Retirement Accounts
Many people mistakenly believe that their retirement accounts are separate property. After all, they are usually in their individual name. They may have been contributing to these accounts for years and see them as their own investment accounts.
However, under CO Code § 14-10-113, retirement accounts are often considered marital property, regardless of whose name is on the account. Marital property is any property acquired during the marriage. Therefore, if you opened the account after you were married, it is likely marital property. If you opened the account before your marriage, the contributions before the marriage would be separate property, but those made during the marriage would be marital property. Additionally, the earnings of separate property can still be subject to division during divorce.
Colorado uses an equitable distribution system to divide property between spouses. This means that courts do what they believe is just under the circumstances. It’s possible that property may not be divided equally. The court considers factors such as the duration of the marriage, the needs of each spouse, the value of separate property, the economic and non-economic contributions of each spouse, and the increase or decrease in value of the separate property when dividing assets.
The Process of Dividing Retirement Accounts During a Colorado Divorce
Divining retirement accounts during a divorce in Colorado can be complex. It may involve the following steps:
- Identifying the accounts to be divided – You may know of the accounts, or your attorney may have to obtain information about retirement accounts through disclosures and discovery.
- Valuing the account – Retirement account managers may have to provide information about the account’s value on specific dates, such as the day before marriage and the date of the separation. These values are assigned as separate or marital property.
- Determining how to divide the account – The spouses may reach an agreement regarding how they wish to divide the retirement account, such as each keeping the accounts in their own name, one spouse receiving assets similar in value to their share of the spouse’s retirement account, or rolling over a portion of one account into the other spouse’s account. Alternatively, they can have the court determine how to divide the accounts.
- Receiving a Qualified Domestic Relations Order (QDRO) – This legal document is often necessary for a retirement account manager to divide funds and helps avoid the tax penalties of early withdrawals when funds go from one account to another.
- Distributing the funds – The retirement account administrator divides the fund as the QDRO provides.
Contact Our Property Division Lawyers for Help
Dividing retirement accounts can be a complex process and can cause tax and financial consequences if you are not careful. An experienced divorce and property division lawyer can safeguard your rights, review your options, and negotiate for a fair resolution. Contact Stahly Mehrtens Miner LLC at (303) 797-2900 for a no-obligation case review.