Long Island Attorneys Protect Your 401(k) in a Divorce
Attorneys in Hauppauge and Garden City handle financial issues
Tabat, Cohen, Blum, Yovino & Diesa, PC in Garden City and Hauppauge offers sound counsel on how to protect a 401(k) from divorce in New York. Our knowledgeable attorneys strive to achieve a resolution that gives Long Island clients the ability to move forward on a strong financial foundation and with their retirement plans intact.
Understanding your financial situation before divorce
As trying as a divorce can be emotionally, you cannot afford to overlook the fact that a significant financial partnership is also breaking down. Working with an experienced Long Island divorce attorney can help you keep things in perspective and get a handle on key concerns such as:
- Division of 401(k) plans, pensions and other retirement accounts
- Allocation of Social Security and veteran’s benefits
- Life insurance equity and proceeds
- Disposition of debts
- Business ownership
- Effects of a prenuptial or postnuptial agreement
Regardless of how complex your situation seems, we have the skill and experience to represent you effectively.
How is a 401(k) divided in a New York divorce?
Investment accounts, including 401(k)plans can present some unique challenges when dividing marital assets. Growth in value that occurs in a 401(k) while a couple is wed is considered marital property even if the account preceded the marriage. In some cases, both spouses may have their own 401(k) accounts that they can keep when the divorce is finalized. However, even in these situations, judges applying New York’s equitable distribution law might require some transfer of assets from one spouse to the other in the interest of fairness. This could be true if one spouse has significantly more income or savings than the other.
Ways to keep your retirement assets and 401(k) in a divorce
Negotiating a marital agreement is an effective way to maintain your retirement assets should the union end in divorce. If you don’t have such a document in place, our firm strives to negotiate a fair settlement which might allow you to keep your 401(k) with an offset from other assets that are subject to property division. This might be the best solution if you deposited a substantial amount prior to the marriage or if plan rules make dividing the funds difficult.
How is a QDRO used to divide retirement funds?
Cashing out of a 401(k) early triggers a 10 percent penalty and other negative tax consequences. However, there is a way to divide proceeds of a retirement account while leaving it intact. With a Qualified Domestic Relations Order (QDRO), you can assign a portion of the funds to your spouse to be paid when withdrawal is appropriate.
Other aspects of dividing a 401(k) in divorce
Along with the division of assets, there are other considerations to keep in mind concerning your 401(k) and other investment accounts, including:
Removing your spouse as beneficiary of your 401(k)
When you opened your 401(k), you might have named your then-spouse as the contingent beneficiary. As you go through the marriage dissolution process, you might want to change that designation and any other similar provision under which your ex would receive assets presently under your control.
Outstanding loans from a 401(k)
Some 401(k) owners choose to take a loan against the proceeds in their account in order to meet a financial need. When approaching divorce, it is critical to evaluate loans that are guaranteed by any investment to see that the agreement remains valid after the marital estate is divided.
Contact a Long Island divorce lawyer for advice on safeguarding your 401(k) funds
Tabat, Cohen, Blum, Yovino & Diesa, PC handles sophisticated divorce issues for clients throughout Long Island, including matters relating to the disposition of 401(k) accounts and other investments. To schedule a consultation about your case, please call our New York attorneys at 631-587-5100 or contact us online. Our offices are located in Garden City and Hauppauge.