If you are contemplating divorce or legal separation in Massachusetts, you may have thought about your assets, including your retirement accounts, and how the court will split them. Let’s look at how the court may divide your qualified retirement plans according to the state laws.
Qualified retirement plans
Retirement plans are an essential asset for almost everyone in Massachusetts because it is where we draw our money from for our expenses after we retire. If you started getting your benefits earlier in your career, you’d have a significant amount of funds for all your needs and more by the time you retire. This is why qualified retirement benefits are one of the crucial assets to divide in a divorce.
The term “Qualified” is used for the benefits with tax advantages. Conceptually, when your employer sponsors a plan for you, the government won’t tax your contributions and investments. You will only pay taxes when you withdraw money from your account or transfer it to another account.
Examples of qualified retirement plans include:
• Employee stock ownership plans (ESOPs)
• Defined benefit plans, e.g., pensions
• Defined contribution plans, like 401(k)
• Keogh plans
Dividing qualified retirement plans
The judge will aim to divide your retirement benefits equitably and fairly in Massachusetts. Deciding on what’s fair is influenced by many different factors, including the length of your marriage, employability, vocational skills, income, occupations, health, ages, conduct during your marriage, specific needs, liabilities, contribution as a homemaker, and many more. The combination of these factors will determine if the judge will divide your assets almost equally or disproportionally.
Also, besides the above factors, the judge will consider contributions you made before marriage. All your contributions made before marriage are your separate property. In contrast, according to family law, any investments, growth, and payments made after marriage are communal, thus subject to division.
Every marriage is unique. Therefore how the judge might split your retirement benefits will depend on your specific circumstances. If you were married for a long time and didn’t waste your finances through reckless spending, your chances of getting half of the marital estate are high.