Divorce means dividing marriage assets

Divorce means dividing marriage assets

| Nov 10, 2020 | Divorce

Like most states, New York has a marital property law that says marriage assets must be distributed in an equitable manner when a marriage ends in divorce. An equitable manner means that a former spouse will not suffer a sudden drop in standard of living due to the divorce; it does not mean a former spouse is entitled to half of all financial and other assets. The idea is to ensure that both spouses can maintain a relatively similar and stable standard of living after the divorce concludes.

401(k) accounts are subject to division

State law says your 401(k) accounts are part of the marital assets that are subject to division upon divorce. The cash placed into the account prior to the marriage does not count toward marital assets, but any money placed in it during the marriage is fair game. A judge will not necessarily order an account be cashed out to distribute money to the spouse needing support, but an equitable exchange of assets is needed to ensure ongoing support when needed.

Distributions might trigger costs

Before any 401(k) assets can be transferred, the administrator exercising fiduciary control must review and okay it to ensure that it complies with state and federal laws and various legal agreements governing distributions. Early withdrawal penalties and state and federal taxes could reduce the value of one or more 401(k) accounts by a significant amount. A plan’s administrator must agree to the final distribution plan and can reject preliminary agreements. That could require more court dates and more legal costs for both divorcing spouses.

Legal help untangles assets complications

Legal agreements can override the need for one or both spouses to cash out one or more 401(k) retirement accounts. The complicated nature of ending a marriage in New York and determining an equitable distribution of marriage assets might overwhelm people undergoing a divorce. An experienced family law attorney in the Williamsville area may help you to better understand how state law and divorce affect your 401(k) accounts and other assets.