Retirement Plans & Pension Division in Monmouth County
Dividing Pension After Divorce in New Jersey
One of the major assets many couples have are retirement accounts. When you are going through a divorce in New Jersey, these are considered marital assets if the retirement plan or a pension was acquired during a marriage or if a spouse was added to a pre-existing plan after the marriage. Therefore, retirement accounts are subject to equitable distribution under New Jersey law.
The equitable distribution of retirement plans and pensions is determined by the type of plan or pension it is and, therefore, the specific formula used to equitably distribute this asset.
Concerned what will happen to your retirement assets during your divorce? Talk to us. We can help. Contact our offices today to learn more!
How Retirement Plans and Pensions Are Equitably Distributed
New Jersey laws on equitable distribution state that each spouse is entitled to receive some of the property or assets acquired during the marriage. It does not matter whose name is on the title. This extends to pension and retirement accounts.
There are generally two types of retirement interests:
- Defined contribution plans: Retirement accounts, such as an Individual Retirement Account (IRA) or a 401(k) that are tax-deferred and that have a specific defined balance resulting from contributions of a certain amount and from investment activity.
- Defined benefit plans: Pensions that will pay out a specified monthly amount at retirement, often based upon various factors such as length of service or age.
Defined contribution plans can be divided by rolling over a certain amount from one spouse, to the other, on a tax-free basis. An IRA can be divided in such a fashion by doing a tax-free rollover from one ex-spouse to the other. A 401(k) plan, or other qualified plans under law, requires the preparation of a Qualified Domestic Relations Order, which is an Order that is entered following the divorce that allows the division to take place on a tax-deferred manner.
Defined benefit plans are usually divided by the deferred distribution method, whereby the marital portion is defined, and then the benefit is divided once the benefit begins being paid. The marital portion is defined by the marital coverture fraction, where the numerator is the total number of months during the marriage, and the denominator is the total number of months the spouse is the participant. This fraction would be divided as part of the property distribution.
Going Through a Divorce With a Pension or Retirement Assets? Talk to Us.
If you are divorcing and are concerned about your retirement assets, talk to an experienced Monmouth County divorce lawyer at the Law Office of Steven P. Monaghan, LLC.
Our offices can be reached at (732) 624-6343. Call today to schedule your free consultation!
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