Proper retirement planning often begins early in life, and a divorce at any age can seriously impact those plans. However, the older a person is when he or she files for divorce, the greater the impact. This makes the handling of asset division especially important for New York couples no matter their age.
Unfortunately, the myth that retirement funds linked to only one spouse's name or workplace constitute a separate asset continue to perpetuate throughout society. Retirement funds saved prior to walking down the aisle are indeed separate property, but anything saved thereafter is considered marital property. The reason for this is simple, as any money set aside for retirement during the course of a marriage is typically done so with the intent of providing financial stability for both parties.
So, who exactly gets what? In general, retirement funds are split relatively equally, although some family law courts will take extenuating circumstances into consideration. If neither party is at the age of retirement at the time of the divorce, both individuals may keep the money in the account until they reach retiring age regardless of the name that is on the account. However, the party who is not linked to the account and was awarded a portion of it may only withdraw the amount that they were relegated in the divorce settlement. There is also the option to withdraw the funds immediately, but this is usually accompanied by various penalties and can potentially affect spousal and child support payments.
A prenuptial agreement can be used to preserve a retirement account as a separate property and preclude it from asset division. In the event that a retirement account is not included in a prenup and is still considered marital property at the time of a divorce, New York couples should be certain to give careful attention to the matter during asset division. With the steady rise of gray divorces, ensuring a stable financial future is often one of the most important goals in divorce proceedings.
Source: wcpo.com, "How retirement plans get divided in a divorce", Jan. 20, 2016