Search Site
830 Post Road East, Suite 301 | Westport, Connecticut 06880
2435 Route 6, 2nd Floor | Brewster, New York 10509
Call For Consultation 203-557-9500845-860-0000
Protecting a 401(k) – CT

How to Protect Your 401k in a Divorce

401ks and Divorce in Connecticut and concept of “Equitable Distribution” in CT Divorce Law

A badly managed divorce can threaten your retirement security by giving your spouse an undue allocation of your 401k and other retirement investments. At Needle|Cuda in Westport, our Connecticut family law attorneys have handled this issue innumerable times. We know how the law applies to division of retirement savings in divorce and we understand the nuances of exceptional cases. Whether you are the earner whose labor funded the retirement account or you are a dependent spouse whose contributions are less tangible, we will fight to preserve your financial interests.

401ks are Considered Marital Property in Connecticut whether accumulated before or during the marriage

Protecting 401k In DivorceIn a divorce, the retirement accounts of either spouse, including 401ks, IRAs and pensions, are subject to Connecticut’s equitable distribution system, whether they were earned before or during the marriage. The court has broad discretion in dividing the assets fairly, though not necessarily equally. Connecticut statutes provide the court with factors to be considered, including each spouse’s contributions to the marriage, both economic and otherwise. If the spouses have entered into a valid premarital agreement that specifies retirement accounts are separate property, the agreement may be enforced during the divorce proceeding. Otherwise, it is our job as your attorneys to demonstrate your entitlement to a fair share of the account.

Using QDROS (Qualified Domestic Relations Orders) to avoid early withdrawal tax penalties in 401ks and Divorce

There are penalties and taxes imposed on early retirement fund withdrawals, so disbursing funds to pay one spouse, or dissolving the account and dividing the funds, can unduly deplete the asset. To solve this problem, the law allows division of certain retirement assets without penalty with a special court order, called a qualified domestic relations order, or QDRO.

A QDRO instructs the plan provider to assign assets from the account to the parties according to the proportion or the dollar value the court decides. If the transfer is made pursuant to a divorce and all the funds are still held in a deferred tax account, there is no disbursement and no taxes accrue and no penalty will be assessed. Upon division by a QDRO, each party can receive his or her separate share of the retirement account as a separate retirement account, with all the usual rights and restrictions.

“Equitable Distribution” of Pensions and other Retirement Plans in Connecticut Divorce

There are other ways to protect your retirement savings upon divorce. One spouse may be given a larger share of the retirement proceeds which is offset by receiving a lesser share of other marital assets. The court could order a lump sum, based on present value, to be paid immediately to the nonearning spouse, allowing the earning spouse to keep the account. If a pension has vested, it can be considered as income and utilized for support purposes. If a pension has not vested, the analysis will likely be a little more complicated, but that pension still may be subject to division in the divorce. A Connecticut divorce lawyer at our firm can explain all your options with respect to your retirement savings.

Contact our Westport divorce lawyers to protect your 401k under CT Divorce Law

Needle|Cuda in Fairfield County helps Connecticut clients obtain a fair share of retirement savings during divorce. In all matters, we provide highly responsive service and effective representation focused on positive results. To schedule a consultation, call us today at 203-557-9500 or contact our Westport office online.

Frequently Asked Questions (and Answers) about asset and property division in Connecticut divorce

Equitable property division is the "fair" distribution of property owned by both spouses—either marital or separate—in the event of a divorce as determined by the court. The critical term is fair concerning equitable property division proceedings. As discussed above, what the court deems "fair" in equitable property division is rarely equal. Connecticut is an all-property state, meaning that all types of property are considered when the court makes its findings. It is important to know the difference between the types of property to be divided.

While a divorce decree could result in a 50/50 split on all marital property, in practice, that rarely happens. In Connecticut, equitable distribution means that the court will consider various factors when they decide how the marital property will be divided. This could result in one spouse receiving the lion's share of the property to balance an inequity in earning power or to provide a financially dependent spouse with the means to become self-sufficient.

Separate property is any property owned solely by one spouse, such as property acquired before the marriage, gifts, or inheritances.  In most equitable division jurisdictions, separate property would be excluded from the court's distribution discretion because property established to belong to one person should remain with that person. However, because Connecticut is an all-property state for the purposes of divorce, even the property which has been proven to be owned or under the control of only one spouse is still subject to distribution. This includes exotic property like art, cars, and other unique or custom items.

Marital property is property obtained by either party while married. This property can include items like cars, houses, or other financial assets acquired while you and your spouse are married. Even assets like retirement funds can be distributed in divorce to the extent that those funds were added to the account while married.

It is unlikely that any spouse will be left without any interest in their 401k at divorce. But because retirement accounts are eligible for "Equitable Distribution" in a divorce, it is possible that a spouse could be forced to part with a portion.

Through the discovery process, your lawyer can demand that your spouse provide all relevant financial information. This may include whether they have a retirement account and which institution services it. Spouses that seek to hide assets may be sanctioned by the court.

For a prenup to be valid in Connecticut, it must meet several requirements. The judge handling your divorce will be responsible for determining the validity of a prenup. However, the divorce attorneys at Needle I Cuda know the law surrounding prenups and will be your best resource in evaluating the potential validity of any prenuptial agreement.

The law in Connecticut does not favor either spouse. A judge deciding who gets the house is bound to follow the law. They are not permitted to favor either spouse when determining what is equitable. Still, a spouse that was the primary caretaker for the children during the marriage can argue that when considering all of the factors, they should remain in the marital home. Spouses must remember that that will not be the only factor considered by the court.

The court may award the marital home to the spouse that is awarded primary physical custody. Still, primary custody is defined as having the children more than 50% of the time. In other words, having primary custody is different from sole physical custody, which would mean one spouse has the children all of the time. In a sole physical custody situation, the spouse caring for the children full-time may be likely to get to remain in the marital home.

Yes, but not unless an order from the court has been obtained or you and your spouse agree that it is best to sell the home--and the sale of your house is incorporated into your final (court ordered) divorce decree. Clearly, before agreeing as impactful as this, you will want to consult with a divorce attorney before any agreement is finalized. Issues surrounding taxes, title, the mortgage, possible liens, and how the proceeds of the sale will be allocated will need to be sorted before a sale is effectuated.

It depends. In short, all property, no matter when it was acquired and by whom, can be divided and distributed upon divorce in Connecticut. This can potentially include a property one spouse owned in full before the marriage. While you may be permitted to argue that certain property should be excluded from the marital estate, the law in Connecticut does allow for equitable distribution of all property of both spouses.

Who will get the marital home after the divorce depends on several factors. If there is an agreement between the spouses on what will happen to the marital home, then that likely will be the result. For divorces where there is no agreement, a judge will decide based on the "Equitable Distribution" factors that must be considered by statute . If there are children involved who are currently living in the home, that may also have a bearing on who will get the home.

While it is rare that a spouse will lose all interest in a business due to a divorce, the business may need to be sold. Still, when this happens, the proceeds from the sale will be distributed between the parties. It is unlikely a business asset will be sold with only one spouse receiving all of the proceeds.

How much the business is worth can be determined through the use of business valuation experts. These professions will look at the business's data and draft reports that will tend to show what the business is worth. Another method is comparing the sale prices of similar businesses within the same industry.

Through a process known as discovery, your lawyer will be able to request all relevant information concerning the business and its financial health. Valuation experts can then analyze that info to paint a picture of the business asset's worth and projected outlook. Once a value is determined, the business asset or the value assigned to the business asset may then be distributed by the court upon divorce.

It depends.  In short, all property, no matter when it was acquired and by whom, can be divided and distributed upon divorce in Connecticut. This can potentially include a property one spouse owned in full before the marriage. While you may be permitted to argue that certain property should be excluded from the marital estate, the law in Connecticut does allow for equitable distribution of all property of both spouses.

Contact us

Quick Contact Form