You count on your 401(k). It’s your retirement, your nest egg. You’ve been saving for years, and you invest the max amount whenever you get the chance. Your finances are in good shape, but your marriage is not. You and your wife have been fighting for months. Your relationship is beyond repair. Filing for divorce is imminent.
Your wife is ready to move on too, but not without a portion of your 401(k) … she claims she’s entitled to at least part of what you’ve earned over the years. So is she right?
Is a 401(k) Considered Marital Property?
In a divorce, your 401(k) is very much up for grabs, but, how can this be? The short answer is this: in Virginia, your 401(k) may be considered marital property. In a divorce, all of the disputed property is split into one of the following three categories:
- Martial Property. Property that you own jointly with your spouse is usually considered marital property. Homes are great examples because the title is often in both of the spouses’ names. Martial property also includes property that you and your spouse purchased together, like a truck or a hot tub. Gifts and inheritance are marital property if the person who gave the property to you wanted you to own it as a couple.
- Separate Property. Property that you obtained before marriage. Gifts and inheritance can be separate property if the person who gave you the gift named you as the sole recipient. However, if you treat this gift or inheritance like it’s jointly owned during your marriage then it likely will be labeled as such when you get divorced.
- Part Separate, Part Marital Property. This is the hybrid, and this is where things get complicated. Let’s say you started a business before you were married. The company is in your name, but not in hers. Your wife is not an owner, but she did work for the company while you were married. The business is yours; it is separate property, but the income that the business generated while you were married is a different story. The judge could determine that your wife was part of the company and helped it grow. The court could conclude that your ex’s personal efforts increased profits and added value that the company otherwise wouldn’t have received. For these reasons, the judge could label the business’s profits marital property. You won’t have to give away your business, but you may have to pay her for the value that she added.
But It’s Mine! What Makes MY Retirement Account Marital Property?
Your 401(k) isn’t just your nest egg. While you’re married, the court treats the money you earn from your 401(k) to be jointly owned. After all, you’re married. You agreed to live with your spouse and to share a life together. When you put away money, you’re setting it aside for you and your family. You save for retirement, so that you and your wife can live off of the money when you’re older. You save for your family, not yourself.
In Virginia, from the time you get married until you’re legally separated, the earnings from your 401(k) are usually jointly owned. That is, your retirement funds are usually not just yours, they’re partially your wife’s as well.
How Much of My 401(k) Can She Take?
Your ex can receive up to half of the amount you earned in your 401(k) while you were married, but before you were separated. Courts don’t always split this amount in half. The judge considers several factors and will look at how much your 401(k) increased before, during, and after your marriage.
Never agree to half until a lawyer reviews what your wife’s potential entitlement would be! It’s almost never 50%.
How Can I Protect My 401(k)?
In order to truly protect your retirement, you’ll need to have plenty of foresight. For example, you can enter into a prenuptial agreement before you get married. You can ask your wife to agree that your 401(k) is off limits and is yours alone. If she agrees to those terms and signs the prenup, your 401(k) should be safe if you later end up getting divorced. This sort of an arrangement could also be made while you’re married.
During the divorce, you can enter into an out-of-court agreement. Assets can be negotiated, and they usually are in divorce. You can keep your 401(k) and give your wife the truck, for example. These arrangements must be presented to the judge for approval.
Who Can You Call For Help?
Your 401(k) is important, so don’t give it away in a divorce. Know your rights, understand the law, and hire an attorney to keep as much of your 401(k) as possible.
When you’re looking for a law firm who will fight for your retirement, look no further than The Firm For Men. They serve men throughout Hampton Roads, and they’ll work hard to keep your money in your hands. Give us a call at 757-383-9184 today.