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How Massachusetts couples handle retirement accounts during divorce

The biggest assets that couples share generally become the primary points of contention in re: property division when they file for divorce. For couples considering marital dissolution in Massachusetts, businesses, real property and financial resources are often the most hotly-contested assets included in their marital estate.

Retirement savings could include hundreds of thousands of dollars in marital income slowly set aside in special tax-deferred accounts for people to use when they’re no longer working. Oftentimes, a substantial portion of those savings are marital assets that couples will have to divide after a divorce. Even if an account is only in one spouse’s name, contributions during marriage are usually marital property.

How do divorcing couples in Massachusetts typically handle their retirement savings?

They can divide the accounts directly

Even if it is still multiple years before someone is theoretically eligible to start using their retirement savings, it may be possible to divide the account without penalties. Early withdrawals to cover household expenses will usually result in taxes and other penalties assessed against the account that can substantially diminish someone’s retirement savings. Thankfully, that risk is not as big of a concern during divorce proceedings. Provided that the spouses follow the right process by drafting a qualified domestic relations order (QDRO), submitting it to the courts and then sending it to the appropriate professionals to divide the account, it is possible to split retirement savings in a divorce without actually incurring the standard penalties for early withdrawal.

They can utilize the value of the account instead of dividing it

Some people are very protective of their retirement accounts even though they recognize that they are technically marital property. They may prefer to retain their retirement savings even if it means making significant concessions elsewhere. Those who take the time to establish the marital portion of the retirement account can then use that value when negotiating terms for the division of other assets and could, therefore, potentially retain their retirement savings without needing to share them after sacrificing their interest in other martial assets. As with other marital property, retirement savings accrued during the marriage will be subject to equitable distribution in accordance with state law in the event of contested proceedings.

Learning about how most couples handle major assets like retirement savings can help people better determine how to handle those assets when they divorce. Seeking legal guidance can be helpful as well.