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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11605
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am in the middle of a divorce. I have a 401K through my

Customer Question

I am in the middle of a divorce.
I have a 401K through my employer..
it had 150K in 2000 which is 2 years before I go married in 2002.
Now the account has 115K in it.
I have been putting money into at an average of $400/month..
But the account has been loosing money for a long while...
My question is how to divide this account?
Is my spouse entitled to any of it?
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.

Hi,

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That really depends on how the process goes. The judge certainly has the ability to divide it as part of the property settlement

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I he/she does ... be sure that it's done through what's called a QDRO (Qualified Domestic Relations Order)

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This is where an IRA is set up for your ex, and it's transferred into that just like a rollover. That way you have no tax when it's awarded (IF it ,or any OF it , is). She will be taxed as she pulls from her resulting IRA

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NO states have automatic rules that say she's entitled, If you'd like to give me your stat I can see how things are handled I(for example in SOME states, every opportunity is given for you to work itout for yourselfves before the court ever become really involved.

Customer: replied 1 year ago.
I live in NJ.
Again, if I had 150K before the marriage and now it is 115K..
So, there was a loss through out the marriage...
Does she get a portion of the 115K or nothing because there has been a loss
Customer: replied 1 year ago.
I have a listing of all the contributions and realized losses since 2000. If you'd like I can upload it to you.
Expert:  Lane replied 1 year ago.

No, the facts you state here ... it's only worth now, less than what it was before the marriage, is a big piece of the pie Ia big factor in what a judge will say) but it's not that simple.

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New Jersey is an Equitable distribution state, which means that the marital property will be divided between spouses in a way that is equitable, "fair."

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The court decides what’s fair based on a set of factors designed to show ... (1) how the spouses contributed to the marriage and (2) what each of you will need to move forward after divorce. The division does not have to be equal.

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So yes, you win on the (what you brought into the marriage (or existed before the marriage) BUT lots of other factors can swing it back the other way, say if it looks like she needs' MUCH more than you to move forward equally, and 401(k) is one of the only assets you have to contribute TO that.

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You have a chance that, because of the value before marriage and the value today (and the fact that only you contributed to the plan that it will not even be considered as iin the "marital property" pot (which is what gets divided). Separate property

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The court will presume that any new property gained during the marriage is marital property, regardless of what title says. Even gifts given between the spouses – except the engagement ring – are marital property.

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Separate property is property owned before marriage or after one of you files for divorce.

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So again, you have a LOT on your side that would say that the 401(k) is not marital property but separate property ... but a good divorce lawyer can sway the judge that it was because of whatever SHE brought to the table DURING the marriage that you were able to contribute what you did during that time, and that there would be even less there had you not contributed what you did because, say, she worked and helped cover the bills OR didn't work and stayed at home with children so you COULD word and save for the two of you.

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To read more on how an increase in the value of separate property during marriage can transmute into marital property, see the case Scavone v. Scavone, 230 N.J. Super. 482, 486-93, (1988).

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I wish it were simpler than this but the court in NJ has to look at a LONG list of factors, and the 401(k) is not necessarily completely off the table. The safe way to put it is, that's the starting point, but it stays in tact much better if your spouse has an asset worth the same value

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Here's an excellent resource on this issue: https://www.weinsteinlawoffice.com/retirement-assets-and-new-jersey-divorce-101.html

Expert:  Lane replied 1 year ago.

According THIS NJ Attorney:

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Pensions, 401Ks and any other qualified retirement assets are subject to equitable distribution in a New Jersey divorce. Each spouse has a right to any retirement accounts accumulated from the date of marriage (or after when applicable) to the date of the filing if the Complaint for Divorce in the Family Part of the Superior Court of New Jersey. In my practice as a family law attorney, the only time one spouse may retain “their” retirement asset is when we give the other spouse an asset that is equal in value during negotiations. This can be a complex scenario as an asset that is available immediately (i.e., a bank account) is different than a retirement account, which cannot be liquidated absent penalties and taxes. Sometimes an individual can take a loan from their pension, but then that person has a new monthly bill to pay.

Expert:  Lane replied 1 year ago.

I hope you'll rate me positively, using the stars on your screen … (that's the only way we get credit for the work here) … based on thoroughness and accuracy, rather than any good news/bad news content ... Hopefully, having all the facts will help you "see around some corners."

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Let me know if you still have questions...

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Lane

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