Connecticut Family
Law Attorneys

Are retirement accounts separate property during divorce?

On Behalf of | Jan 16, 2024 | Divorce |

Property division matters are often a major stressor related to divorce filings. People may worry about the need to equitably divide their resources with a spouse. No one wants to lose the home equity that they have spent years building or half of their investment accounts.

Retirement savings can also trigger anxiety and leave people feeling trapped in an unhappy marriage. Frequently, married spouses plan their retirements based on benefits available through someone’s employment. The money they set aside for retirement may be in an account connected to someone’s job and in the name of only one spouse.

Are those retirement savings the separate property of the person who holds the account?

The name on the account isn’t the biggest concern

Contrary to what many people assume, a financial account in one spouse’s name is not automatically their separate property. Those resources can be separate property if someone protected them with a marital agreement, like a prenuptial agreement, or if they set them aside before the marriage and did not contribute to the account during the marriage.

Otherwise, the amounts deposited during the marriage are most likely subject to division. Spouses have to disclose any assets they hold solely in their own names during a Connecticut divorce. They also have to inform the courts and their spouse about their debts and their separate property. Those disclosures help ensure a reasonable or equitable distribution of marital property.

Often, retirement accounts are partially separate property and partially marital property. Spouses have to determine how much of the account is subject to division. The marital value of the account can be a major sticking point in property division negotiations.

They have the option of actually dividing the account or using its value when negotiating other terms, such as who keeps the family home. If the spouses decide to split the account or if that is what the courts order them to do, they need to follow a specific procedure to avoid penalties and fees.

Individuals who worry about their financial stability during their retirement years may prioritize preserving as much of their retirement savings as possible in a Connecticut divorce. Understanding the rules that govern property division is an important first step toward negotiating a reasonable settlement.