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Courts typically split retirement accounts in Michigan divorces

People spend their entire working lives developing nest eggs for retirement. In some families, both spouses contribute to the same account. In others, one spouse may have a pension or a retirement fund through work. Regardless of how you’ve been saving those funds, you’re probably worried about what will happen to them in a divorce.

Due to the unique nature of every marriage, there’s no way to predict with absolute certainty how the courts will rule in a divorce. You can, however, familiarize yourself with the standard practices of Michigan family law courts and how Michigan law structures asset division.

Michigan laws require judges to divide assets equitably

When it comes to handling asset division, Michigan law favors the equitable distribution standard over the community property standard. That means that judges have a bit more discretion and latitude when handling asset division. Equitable does not mean even, but rather fair.

The courts can divide all debts and assets acquired during marriage, except for separate property that belongs to ab individual spouse. Examples of separate property include gifts and inheritances. However, retirement accounts and pensions may end up divided in a divorce. Even if they are held in the name of one spouse or offered through that spouse’s employer, the value of the retirement account is usually marital property.

Splitting retirement accounts in divorce is very common

If you have spent years building up a retirement fund, the thought of losing much of that value and incurring fees and penalties as well is probably upsetting. The good news is that although you will very likely need to split your retirement account, the court order issued in your divorce can protect you from penalties and fees.

When ordered to divide a retirement account, you can use a Qualified Domestic Relations Order (QDRO) from the courts. The division of your account in accordance with a court order will not result in any kinds of fees or penalties. This can be particularly important for those approaching retirement age.

Sometimes, the courts don’t split the account

There are many ways for the courts to handle division of a pension or retirement account. Many times, they issue a QDRO to split the actual Roth IRA or 401k involved. If the account is a pension managed by an employer, the process could end differently. The courts could issue a spousal support order that requires you to split your pension funds with your spouse when you start receiving them.

Other times, the courts could simply award your spouse other assets of similar value to the retirement account or pension in lieu of splitting the account. Regardless of how they actually handle the process, it’s important to understand that your retirement account or pension are typically marital property and therefore subject to division.