We are divorcing. What will happen to this 401 (k)?


Q. We are in the process of a divorce – we are only staying together because we both lost our jobs. We know we can take 401 (k) s without penalty, but what does it mean when we divide the assets and ultimately rank?

– husband

A. New Jersey is a “fair distribution” state, which is not the same as “equal distribution”.

In the event of divorce, matrimonial assets and debts must be distributed equitably – just – between the spouses, taking into account the facts of each particular case.

The first question for the purposes of equitable distribution is whether the active Where debt in question is of a matrimonial nature. In the event of marriage, each spouse would have an equitable interest in the assets and liability for the debt in the event of a divorce, said Thomas Roberto, family law attorney at Adinolfi, Lieberman, Burick, Falkenstein, Roberto & Molotsky at Haddonfield.

In general, he said, a pension asset acquired during marriage is considered a marital asset subject to equitable distribution.

“More precisely, the part of the have retirement accrued during the marriage, and any appreciation on this matrimonial part, is subject to division between the spouses, regardless of the name of the account title, ”said Roberto. “Loans taken from retirement accounts may also be allocated equitably, depending on the circumstances and the purpose for which the borrowed / withdrawn funds were used. “

Two key considerations in determining how loans and / or withdrawals of an old age credit would be processed at the time of divorce are whether both spouses consented or were aware of the loan / withdrawal, and whether the funds obtained through the loan / withdrawal were used for matrimonial purposes, for example for the payment of marital expenses, he said.

“If one of the spouses strikes or liquidates a marital property and uses those funds for non-marital purposes without the knowledge or consent of the other spouse, this can be seen as an act of “dissipation” or “waste,” he said. “In this case, the spouse who acted unilaterally may be held responsible for the funds withdrawn – and applicable penalties and interest – at the time of the divorce. “

But, he said, if the two spouses agree to withdraw and / or to borrow against one or more have old age, then neither would be penalized for it at the time the property is distributed in the divorce. Instead, the two spouses would share responsibility for the loan / withdrawal they agreed to, Roberto said.

“Loans contracted against retirement accounts with the consent of both spouses would likely be treated as a marital debt for which the parties share responsibility in an equitable distribution. In the event of withdrawals, each spouse’s share of assets would be reduced in proportion to the total amount withdrawn, ”he said.

Email your questions to [email protected].

Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com‘s weekly electronic newsletter.

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