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How are retirement accounts affected in property division?

On Behalf of | Aug 27, 2020 | Divorce |

Couples going through divorce or separation are in one of three groups — those who can work out settlement agreements quickly and without issue, those who may need some help negotiating the best terms, and those who end up fighting things out in court. It doesn’t matter which of these groups you belong to, the end goal is to walk away from the relationship in a good position to move forward in your life. One thing that will help you reach that goal is achieving a fair property division settlement.

When you think about splitting your assets, things like the house, checking and savings accounts, and certain pieces of furniture or other household goods are first to come to mind. Sometimes people forget about the one asset that may be their most valuable — the retirement account. Some believe this should be separate property, but in South Dakota, it is often considered shared property and subject to division.

Equitable distribution state

South Dakota is an equitable distribution state. This simply means that:

  • Both parties have the right to a fair division of all marital assets.
  • That division may not be a perfect 50/50 split.
  • Property protected under a valid pre or postnuptial agreement is not subject to division.

When it comes to retirement accounts, any contributions made during the marriage become shared assets — unless protective measures exist that say otherwise.

Don’t forget the QDRO

There’s a very specific way to go about splitting a retirement account. You need to file a Qualified Domestic Relations Order, and that order has to receive both court and plan administrator approval before any funds will be moved. One thing to keep in mind is that the standard QDRO form that you can get from your plan administrator may not fully protect you. Legal counsel may be able to help you draft an order that does.

How much will each party walk away with?

The amount is different in every case. You may find the account split in half or only a percentage given to the spouse who does not own the account. Of course, if it better fits your situation, you may not have to split the account at all depending on how you are willing to divide your other assets.

Fair property division terms are possible

Reaching fair property division terms that do or do not include the splitting of a retirement account is possible. You may find you need a little help getting there, though, and that is OK. With the right assistance, you can do everything possible to achieve a divorce agreement that best benefits you in the long-run.