“Will I lose my 401(k) when I divorce my partner?” This really is the most commonly known query breakup lawyers hear when the child-related concerns are answered. Unfortunately, there is not any easy answer. In a nutshell – the worth of the 401(k) is considered inside a final division of the marital property irrespective of that really receives it inside the finish.

Pursuant to Indiana Code 31-15-7-4, the courtroom should separate each asset of the parties whether it was owned by either partner before the wedding, acquired by either partner inside their own after the wedding however before final separation of the parties, or acquired by their joint efforts. In other words, each debt plus each asset which existed found on the date of filing for breakup, should be included inside the marital “pot” plus should be separated inside a fair plus fair way either by the courtroom or by agreement.

Further, pursuant for this statute, the courtroom should “presume” a 50/50 division of the marital pot is a fair plus fair division. But which is really the beginning point! A party can rebut the presumption inside favor of the 50/50 division based found on the special circumstances of their case. Let’s consider 2 fairly different circumstances as well as the results for every.

1. Mary plus John. Mary worked throughout the wedding plus contributed immense sums cash to her 401(k), today value $200,000.00. She may owe taxes of around $24,000 whenever she withdraws which cash, thus the post-tax value is about $176,000. She furthermore saved what she may over time plus had $74,000.00 in her own savings account. This really is post-tax cash. The total post-tax value of both accounts, consequently, is $250,000.00. Mary is worried which she must provide John half of her hard-earned income inside the event of the breakup.

John furthermore worked throughout the wedding, generating somewhat over Mary, plus most of his money was chosen to pay your day to day expenses for the family. He furthermore paid for the luxuries the family liked like holidays to exotic nations, horse-back riding classes for their daughter, plus travel soccer expenses for their son. The parties have a house with equity of $250,000.00. No taxes might have been owed about which property when it had been available found on the date of filing. John would like to keep the house however he’s worried which he’ll need to take out an extra mortgage inside purchase to pay Mary her half of the equity.

This really is an simple 1. These circumstances lend themselves to a 50/50 division of the marital property. The argument for a 50/50 division is the fact that both parties contributed to the total value of the marital property – Mary to the savings, that the parties might enjoy inside their later years, plus John to the family’s high quality of living. The dilemma is the fact that John may take pleasure in the marital home today when Mary cannot enjoy her 401(k) till she turns at smallest 59 ½ years of age.

In purchase for every party to have equal access to the fluid assets inside the marital property, then, the parties might need to split the 401(k) equally, split the savings equally,sell the apartment plus share the proceeds equally (or John might need to take out a mortgage inside purchase to pay Mary her share of the equity).

But, when the $74,000 savings is enough cash for Mary to buy the unique house plus to keep the mortgage repayments in her budget, the answer which addresses both parties’ authentic concerns will be for Mary to keep the 401(k) plus savings whilst John keeps the house.

So – the answer to Mary’s query is “no – we don’t need to lose a 401(k) in the event you divorce a spouse.” But, you need to include it inside the marital pot plus you need to split which pot inside a fair plus fair way.

Parties that collaborate towards a fair plus fair result which addresses every parties’ concerns have the added advantage of keeping lawyer fees low plus keeping more of the marital property for the parties plus their kids.

2. Susan plus Alex. Alex had a 401(k) value $200,000.00 whenever he married Susan plus contributed an more $100,000 following the wedding. Susan had a 401(k) value $50,000.00 whenever she married Alex, produced no further contributions afterwards, plus withdrew the revenue to pay for a late honeymoon trip to Europe. By the time taxes plus penalties were removed, Susan’s $50,000 had been reduced to $35,000.00. There was no prenuptial agreement. Susan plus Alex were married for 3 years plus had no youngsters together. Susan gave up a wise job plus stayed house to care for her 2 youngsters from a before wedding.Susan furthermore amused Alex’s client’s at house plus otherwise aided Alex grow his clientele throughout the years she didn’t function. Assuming which Husband’s 401(k) is truly the only marital asset to be separated, the query of “how” is not thus easy!

Pursuant to I.C. 31-15-7-4, Husband’s whole 401(k) need to be included inside the marital pot despite that nearly all of it was earned before the wedding. Susan’s pre-marriage 401(k) does NOT go inside the pot considering it no longer existed found on the date of filing for breakup. But, the courtroom will consider all of the factors included inside this case inside purchase to determine an fair method to split Husband’s 401(k).

The factors a courtroom would consider include the following:

a) Susan invested her pre-marriage 401(k) found on the couple when Husband kept his pre-marriage 401(k) intact,

b) Susan was capable to remain at house plus care for her kids when Alex supported the home about his money,

c) Because Susan didn’t function throughout the wedding, she was capable to entertain customers plus otherwise assist Alex grow his money,

d) Susan is capable of generating a immense money however, may earn considerably lower than Alex,

e) Husband earned $100,000 of the 401(k) throughout the wedding.

In a real lifetime situation synonymous for this 1, the parties agreed which Alex might pay Susan the sum of $150,000.00, that is 50% of the whole 401(k). This agreement recognized the truth which Susan helped Alex grow his company throughout the 3 years they were married, the truth which she will be beginning over when she found unique work, the truth which she produced less income which Alex, the truth which she wouldn’t be capable to substitute the $50,000 she invested found on the couple, as well as the truth which Susan received the advantage of staying house along with her youngsters.

Could a court have granted Susan a lower amount? Yes, indeed! But, Alex was worried which his lawyer fees might expense over the extra revenue he agreed to pay Susan. He was additionally worried which he may be ordered to pay a few of Susan’s lawyer fees as a result of the disparity of money involving the parties. So – the agreement benefited both parties. The significant thing is the fact that Susan plus Alex both felt which their negotiated agreement was fair plus fair plus which they both saved face plus cash by not litigating these issues inside a public forum.

3 Responses to “Will I Lose My 401K If I Divorce My Spouse?”

  • Jose B:

    I really REALLY do not like where this country is headed. Im not blaming Bush or Obama for all of our countrys problems, but instead the greed of our enitre government and some of our workforce. 401Ks are diappearing as are jobs. Energy prices are soon to increase, and college tuitions are rising, all the while it is nearly impossible to get approved for a decent loan. It seems like the government is robbing our country of free enterprise and “picking and chosing” which businesses to bail out . I think its unfair that the goverment lets the steel industry sink but chooses to bail out the auto industry. Every working person is expected to pay taxes, how come every business is not saved? Obviously its because America doesnt have the funding for that, but my point is why should 1 persons job be saved by the government and anothers not when they both pay taxes. Tax money needs to be distrubuted evenly.

    What’s this country becomming? Weve lost our morals.

    Its ridiculous. Big companies are squeezing people for every penny they can get!
    I mean come on! Many companies make consumers pay just to speak to customer service representatives. Dont believe me? Buy a $2000 laptop and wait until something on it stops working (its not a long wait). You will probably be charged by the minute just to speak to somone who may or may not be able to help you. Shouldnt buying their product entitle you to good and FREE customer service? Especially when it was their product that was faulty?!?

    Then you have the media, who brainwashes individuals to believe that they arent good enough. They believe if they make you feel ugly enough you will buy their product. Ugh…

    Finally, everyday families are falling apart because cheating is glorified and people are too busy chasing the dollar to pay attention to their own family. Many modern day movies and TV shows make it seem like its funny when one spouse cheats on his/her significant other. People are turning to divorce lawyers inseatd of marriage councilers leaving childen with a broken home.
    Its all so frusterating!!

    Do you agree?
    i do realize much of this was mispelled. LOL bear with me i was in a mood!
    i do realize much of this was mispelled. LOL bear with me i was in a mood!

  • isk8at818:

    Official Divorce Jan.9,2007.My x-husband duped me into Divorcing after 2006.I had my husband now whom I married oct.07 but we bought My x-husband out of a House contracted to be built to be nice in june 2006.My x filed our taxes joint for 05 & 06 when I made $100,000 he made $90,000.But he put $4,500 into an IRA every year knowing we would pay a penalty.He has a 401k that he put $6800 into in 04,05,06.Probably back to 2001.I paid $22,000 in federal taxes 05,06 he paid $2g only .Can I go amend my returns and if so how far back.I was duped by him putting $ in his 401k,and an IRA in his name.I just want to File married but separate ,CAN I amend 05,06.My new husband bailed him out of a house we lost 120g on & he was paid on a w2 and had his BOSS/FRIEND not with hold Federal & state taxes sticking me with paying his taxes while he stashed $50g away in 401k’s & 10g in an IRA
    In summation,Can I amend my tax returns 05,06 from married filed joint to seperate but married since I paid 10 times the amount of federal & state taxes that my Dr.-x-husband did when we both were paid on w2′s but he tricked me by having his boss not with hold the correct amount (only $3,000) I paid $22,000.He also put $ in an IRA in his name while forcing us to pay penalties every year,since he knew he also stashed $7,000 a year away in his 401k .Can I amend return thus I will be refunded and he will need to pay.How do I get the money in we both put in an IRA and am I entitled to his 401k since we filed joint and I paid more taxes 10x more.
    We were Divorced Jan. 9 2007 I was already living with my new husband for 19 months,so why should my present husband who was also the company that paid me on a w2 pay for his taxes the last 19 months of my marriage to my cheap x.I made $100g my x made $90g.I paid $22g in 05 & 06.He paid 2g in 05& 06,while stashing $ into his IRA & 401k.How can I not be able to amend this with IRS he tricked me & his boss helped by not with holding taxes properly on a w2

  • SteveO:

    Me and my girlfriend have been together for only one year and now she is pushing the issue of getting married.. We both have never been married before but i have a $600,000 401K and about $1,000,000 in cash account and i live a good stress free life but i worked hard mostly all my life to get where i’m at now. She is wanting to get married but i’m afraid just like every other marriage i seen with friends, they lost half of their savings to their wives and one of my friends lost 50% of his saving to a wife that SHE was the one cheating and wanted to get divorce after he caught her in their bed with another guy. So it seems like women win either way which scares me the most. I’m pushing the marriage plan away and not looking forward to doing this so will a prenup protect me against her possibly taking half? I’m at a 100% no of getting married anyways but I see why men in this day and age refuse marriage, it’s not in his favor unless he wants kids but other then that, i see the man not benefiting from it. You’re thoughts?

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