Certain property can be hard to divide in a New Jersey divorce because it has emotional value. Many courtrooms have seen spouses fighting over assets with minimal economic value but substantial personal value.
Other times, spouses may fixate on assets that contribute to their current and future financial stability during a divorce. Retirement accounts are often a priority consideration for people as they begin contemplating divorce. What they have saved throughout their working years so far may be crucial for their comfort and independence later in life. It is common for people to worry about the setbacks produced if they must divide their retirement accounts.
Do people always have to split their retirement savings in New Jersey divorces?
Some savings may be separate property
Prenuptial agreements are more common now than they were just a few years ago. Some people begin marriages with thorough contracts designating certain assets as their separate property. For example, spouses may arrange for each of them to retain their own retirement savings accounts or pensions.
Other times, one spouse may have made contributions to a retirement savings plan before getting married. In such cases, all or at least some of a retirement account could be the separate property of one spouse. They may not need to divide the retirement resources that they can claim are their separate property.
Spouses can address savings without splitting them
It isn’t technically necessary to divide every individual asset during a divorce. Spouses or judges can establish terms that only divide certain assets. After determining the marital portion of a retirement savings account, spouses can balance that with other high-value assets or even with marital debts.
The main goal should be a fair outcome, and spouses do not necessarily need to split retirement accounts to address them in a reasonable manner. Allowing the other spouse to keep more home equity or a small business could easily offset their portion of the retirement savings account.
If dividing the account is the best option given the circumstances, spouses can do so without incurring penalties and facing tax consequences. The right documents drafted after the completion of the divorce can help people avoid the penalties often imposed for early withdrawals from retirement savings accounts.
Spouses who identify resources that are important to them can develop a divorce strategy that results in a positive outcome. Retaining retirement savings accounts can be a viable goal for people who can make compromises in other areas of the property division process during a New Jersey divorce.