Your 401(k) assets represent your future financial security. However, they also represent an asset that probably needs to be divided in your divorce proceedings. If you earned and saved some of your 401(k) during the course of your marriage, then the amount of those assets you acquired during your marriage will be subject to the asset division process.
It’s important that you handle the division of 401(k) assets in a way that protects your marital property rights and your future retirement security by avoiding the following mistakes:
Understand you and your spouse’s retirement accounts: There’s an old saying in the legal business, that a lawyer can’t help a client who can’t help him- or herself. The most important thing you can do to help yourself when dividing retirement assets is to understand the full scope of your and your spouse’s financial accounts. Failure to do so could result in miscommunications with your legal counselor, who — to a large extent — is relying on you to help him or her understand what property rights you need to protect.
Don’t agree to change the name of the 401(k) beneficiary before completing your divorce: If the 401(k) is in your spouse’s name, you will likely be named as the 401(k) beneficiary. If your spouse dies before the divorce finalizes and the beneficiary is someone else, all of the funds could end up going to that beneficiary and you could lose your right to receive a portion of those funds.
Regardless of your financial situation, the division of a 401(k) must be handled carefully to minimize tax consequences and protect your marital property rights. Fortunately, with a basic understanding of New York property division laws, most divorcing spouses can navigate this process with ease.
Source: CNBC, “How to avoid mistakes dividing up 401(k) assets in divorce,” Sarah O’Brien, accessed June 08, 2018
