Along with being emotionally challenging, the dissolution of a marriage can present financial hurdles. For this reason, individuals in Minnesota may worry about how the divorce process will impact their retirement funds and thus their ability to retire. Let’s take a look at how divorce impacts 401(k) savings.
If two people decide to get a divorce, it is critical that they review their prenuptial agreement if they created one. This agreement highlights how the two parties’ marital property, or shared property, will be divided during the divorce. However, if they did not develop this type of agreement before getting married, then the 401(k) funds of one individual have to be divided between both parties.
The courts view all the money that people add to their 401(k) accounts while married as marital property, not separate property. This income includes all the funds they added themselves from their paychecks, as well as the dollars that their employers contributed to their accounts. The courts decide how much of a 401(k) will go to each divorcing party based on how much each person contributed monetarily to their marriage. In light of this, one spouse may end up with 70% of the 401(k) savings, whereas the other person may receive only 30%, for example.
If two parties lack a prenuptial agreement, they still have the option of negotiating marital property outside of court in an effort to avoid court intrusion. However, if they cannot produce a mutually satisfactory settlement agreement, they have no choice but to allow a judge to decide for them how their assets will be split. Either way, a divorce attorney in Minnesota will push for an outcome that is in the best interests of the client.