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How to divide retirement accounts in a divorce in Massachusetts

On Behalf of | Aug 1, 2022 | Property Division

In a Massachusetts divorce, the court deems all assets acquired during marriage as marital property, including your retirement accounts. However, they are not usually split like all the other assets; some unique factors can come into play.

Massachusetts divorce laws and how they affect retirement accounts

The state of Massachusetts has what is known as “equitable distribution” when it comes to dividing assets during a divorce. In other words, a fair and just split. This could be dividing them equally between the two spouses or giving a larger share to the spouse closer to retirement age or with a lower earning potential.

Moreover, the court has to determine which parts of retirement accounts are marital property. Both spouses could have an equal claim even if only one spouse is actually contributing to the account. However, the court does have the discretion to deem certain retirement accounts as non-marital property if they were acquired before the marriage or inherited by one spouse.

Do you need QDRO?

Some factors the court considers when splitting your retirement accounts include:

  • The length of the marriage
  • The age and health of each spouse
  • The earning potential of each spouse
  • The contribution each spouse made to the marriage (including homemaking and childrearing)
  • The needs of each spouse

The court could issue a QDRO for retirement accounts such as 401(k) plans, profit-sharing plans, defined benefits plans, etc. However, you don’t need a QDRO if you work for the government because you are exempt from the Employee Retirement Income Security Act of 1974.

Your options for the split

How you go about the retirement accounts division will depend on your desire to keep them for yourself or if you don’t mind sharing them with your spouse. If you want to keep the accounts, you’ll have to buy your spouse out or give them other assets of equal value.

You can also agree to keep the accounts and make withdrawals as needed or take a lump sum from the account, which is what most people opt for. However, both these options have a set of tax implications that could significantly diminish your savings.

Dividing assets is usually an intricate and complicated process, especially when retirement accounts are involved. However, if you understand your rights and options, you can make the process go more smoothly.