A significant part of the divorce process in Massachusetts is dividing assets that spouses have accumulated throughout the course of their marriage. This can often be a complex and challenging task, especially when it comes to dividing retirement accounts such as 401(k)s, IRAs and annuities.
Understanding retirement accounts
A 401(k) is an employer-sponsored retirement plan where employees contribute a portion of their salary toward their retirement savings. IRAs (Individual Retirement Accounts) are personal retirement accounts that individuals set up on their own. It is a perfect option for self-employed, part-time or unemployed individuals who do not have access to employer-sponsored retirement plans.
Annuities, on the other hand, are financial products that provide a steady stream of income during retirement. You can purchase them from insurance companies using after-tax dollars.
Massachusetts property division laws
Immediately you sign marriage papers, all assets and liabilities you acquire become marital property. In other words, your spouse has as much right as you to all your salary and benefits, except inheritances, assets you built before marriage, and gifts solely made to you.
Therefore, in most cases, your retirement benefits (or basically, the part of it accumulated during the marriage) will be equitably divided between you two in a divorce. The court will consider factors such as the length of the marriage, each partner’s contributions to acquiring and maintaining marital property and any prior agreements between the parties when making a decision.
What usually happens
The first scenario is dividing everything fairly, with everyone having their own accounts. However, if you would like to keep all your retirement accounts to yourself, you can agree with your spouse that he or she will take more of the other assets.
In most cases where both parties have significant retirement benefits, it may be better if each party keeps their own retirement accounts. This allows for a cleaner and simpler division of assets and avoids potential tax implications.
Massachusetts law prides itself on equitable distribution, aiming to offer a fair split that acknowledges the unique dynamics of each relationship. Remember, the aim is not to create winners or losers but to ensure that both parties can move forward with their lives in a financially secure manner. It’s crucial to approach this process with an open mind and a willingness to negotiate for an outcome that respects both parties’ contributions to the marital assets.