Do I Have To Split My 401(k) In My New York Divorce?

by | Aug 22, 2023 | Property Division, NY

If you are considering getting a divorce and have money in a retirement fund like a 401(k), you may be concerned about being forced to split your assets with your spouse. Whether or not this will apply to you is based on your individual circumstances – here’s what you should know and how a qualified Long Island, New York divorce lawyer can help you.

Whether You Have to Split Your 401k in Your Divorce Depends on When You Contributed Assets

Whether or not your spouse will be entitled to a portion of your 401(k) depends on when funds were deposited into the account. Because New York is an equitable distribution state, only funds that were deposited after the marriage are subject to equitable distribution. Any money that was put in to the 401k prior to the marriage, even if it was a matched contribution that was made by an employer, is considered separate property.

One example is if you contributed $25,000 to your 401(k) before you got married and $100,000 in the years following, your original $25,000 would be your personal property, but the $100,000 would be marital property and theoretically be split between you. In other words, you would be awarded $75,000 and your spouse would get $50,000. But you could also keep $25,000 and trade the rest of the account for $50,000 in home furnishings or other marital property. This would give your spouse $100,000 in retirement funds.

Do You Have to Split Your 401k 50/50?

The only circumstances in which you would split your 401(k) down the middle with your spouse is if you opened the account sometime after your marriage and if a 50/50 split was equitable. If no assets were contributed before you were legally wed, all of the funds in your account are considered marital property.

The word “equitable” in New York state divorce law means “fair,” which may not necessarily amount to a half-and-half division of the assets held in the account. For example, if your spouse wants the house to avoid uprooting the children and their portion of your retirement account was of roughly equal value to your equity in the house, a judge may rule that you keep the entire 401(k) in exchange for giving them the deed to the house.

Tax Implications of Splitting Your 401k in Divorce

The funds that your spouse receives from your 401(k) are taxable, meaning that they will be responsible for paying taxes when they redeem the money. This is important to consider when dividing property and financial assets.

For example, if one spouse is awarded a portion of a shared retirement fund, the tax burden they also inherit should be compensated for in another way. This could be any property or liquid assets of equal value, including land, housing, jewelry, and cash deposits.

Don’t Hide Assets, Even If They’re Separate

The idea of sharing your hard-earned retirement with your soon-to-be-ex-spouse may be a tough pill to swallow, but it’s imperative that you don’t try to hide the assets or avoid listing them on your divorce paperwork.

Even if the account is strictly separate property and your spouse is entitled to none of it, you could be penalized if you are found to be hiding assets of any kind. Usually these penalties are financial in nature, but if you are held in contempt of court for concealing assets in a divorce, jail time could potentially be on the table.

Get Help from an Experienced New York Divorce Lawyer on Splitting Your 401k or Other Marital Property

Going through the process of figuring out who gets what is one of the most stressful parts of any divorce, especially if you don’t have children and aren’t involved in any custody or child support disputes. You need qualified legal support to help you navigate the challenges ahead and pursue a successful outcome that will protect you now and in the future.

At Hornberger Verbitsky, P.C., we have the skills and experience to provide you with zealous advocacy you can trust. Family legal matters present many obstacles and you need a New York divorce attorney who can let you know what to expect and which options are in your family’s best interests.

Contact our office today to schedule a consultation to learn more about the division of retirement funds in a divorce or complete our short contact form and our team of legal professionals will get back to you quickly. Call now at 631-923-1910,

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