{3 minutes to read} One of the most common problems in dividing up a retirement account as part of a divorce is where money was put into a typical 401(k) before the marriage. It is generally and widely agreed that money that was in the account before the marriage is considered the separate property of the spouse who put it there and is not usually divided as part of a divorce.
The problem is that very few people have the detailed information needed to accurately split out that premarital portion. First, many couples simply have no record of how much money was in the account when they got married some 10-20 years before the divorce. That is compounded by the fact that very few administrators have records going back that far either. It seems that in today’s world, asking for records more than 7 years old is almost always going to lead to a “We don’t keep records after 7 years.”
For the couple facing this problem, there are a couple of possible solutions:
•The easy one is to simply ignore the premarital money and split up the account in an acceptable way. One possibility would be that instead of the simple 50/50 split, the couple could agree that there was some money there, and then decided to go with a 55/45 split or some other numbers that seems reasonable to them.
•Another possibility is to agree to divide the money based upon the number of months that the parties were married compared to the total number of months that money was being put into the account, both before and after the marriage. This is called the marital shares approach. It results in prorating the amount based upon a time rather than based upon actual numbers and again, for some couples, this is a more than an adequate approach to a reasonably fair solution, even though it’s not precise to the penny.
•Lastly, of course, if the records are available, it is possible to do an exacting calculation, in which the amount on deposit at the time of the marriage is separated and its increase is calculated over the life of the plan so that the increase in value for the pre-marital amount is accounted for separately and given to the spouse who put it there.
All of this is designed to take care of a problem where there was money in the account before the marriage. If all of the money in the account was placed there after the marriage, generally, there is no such problem.
For further information, please feel free to contact me at 845-638-4666.
Steven L. Abel, Esq.
101 South Broadway
Nyack, NY 10960
(P) 845-638-4666
(E) [email protected]
