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Dealing with a 401k during a divorce

On Behalf of | Apr 25, 2020 | Divorce

The property division portion of your divorce proceedings in San Antonio will inevitably offer up a few surprises. One such surprise that many are not prepared for is the division of a 401k.

Many clients come to us here at the Law Office of Kate Soulsby with the same question: if my 401k is the result of my employment, why is it a marital asset? Given that contributions made to your 401k during your marriage come from marital income, the court thus views those funds as shared.

Dividing up your 401k

This fact may prompt you to ask how the court handles the division of your 401k during your divorce? You might immediately rule out you or your ex-spouse cashing out whatever amount is subject to division (as doing so typically nets an early withdrawal penalty), yet according to the website, divorce is one of the rare occasions where pre-retirement age withdrawals are not penalized (the disbursement is still subject to income tax, however). Yet typically in a divorce, both sides divide the 401k amount subject to division equally, with both then maintaining those funds in separate accounts.

Keeping the full amount

You can push to keep the entire amount of your 401k if you wish. To do so, you likely will have to offer to relinquish your claim to another marital asset in return. That asset must be comparable in value to the amount you ask your ex-spouse to give up. The court bases that amount on the future potential worth of those assets (not their current value), so it might be more than you are anticipating.

You can discover more information about dealing with property division by continuing to explore our site.