Elderly Man Hand Showing a Jar Full of Coins

Your Rights to Retirement Assets

The Berger Firm April 6, 2023

Saving for retirement remains a crucial financial goal for many individuals and families. Some couples may even decide to maximize their retirement savings by adding each other as beneficiaries or contributing to their partner’s IRA. 

While the primary goal is to put aside enough money to enjoy comfortable retirement years together, things don’t always turn out as planned. In the event of a relationship breakdown, the couples would need to divide their marital property – including contributions to retirement accounts – equitably and justly. 

At The Berger Firm, we are dedicated to offering experienced legal guidance and strong advocacy to clients in divorce and property division-related matters. Our seasoned Kentucky family law attorneys are available to discuss your unique situation and enlighten you about your rights, tax, and legal ramifications of dividing retirement savings in a divorce. We’re proud to serve clients throughout Covington, Greater Cincinnati, and Northern Kentucky, including Newport and Florence, Kentucky. 

Division of Property in Kentucky 

Kentucky is an "equitable distribution" state. According to state laws, marital property – all property, assets, liabilities, and debts accumulated during the marriage – will be divided equitably and fairly between spouses. But equitably does not necessarily mean equally

In order to achieve equitable asset distribution in a contested divorce, the Kentucky court will consider the following factors: 

  • The duration or length of the marriage 

  • The value of property awarded to each party 

  • The economic circumstances and needs of each spouse 

  • The contribution of each spouse to the acquisition of marital assets 

  • The liabilities and debts of each spouse 

  • Other factors deemed necessary by the court to achieve an equitable property division 

A trusted divorce attorney can fully explain the impact of asset division on your retirement accounts and savings and help protect your best interests. 

How Retirement Assets Factor In  

However, the types of retirement plans you operate with your partner will determine the distribution rules that would be employed to divide your retirement benefits. The different types of retirement accounts include: 

  • Saving accounts 

  • Traditional retirement plans, such as 401(k), IRA, and annuities 

  • Military benefits 

  • Defined-contribution plan 

  • Payroll Deduction IRAs 

  • 403(b) Plans 

  • Government pension 

  • Roth IRA 

  • Defined-benefit plan 

  • Profit-Sharing Plans 

All earnings and contributions to the retirement plans or accounts by either party during the marriage will be considered part of the marital assets, which will be divided during the divorce. However, any amount in the retirement accounts before the marriage will be considered separate assets and would belong to the person who made such contributions. 

In the event that there is no prenuptial agreement or any other written document that states otherwise, each party is legally entitled to receive part of the retirement benefits and savings. In order to protect your share of the retirement savings until it is distributed, you may consider filing a Qualified Domestic Relations Order (QDRO). 

Qualified Domestic Relations Order (QDRO) 

A Qualified Domestic Relations Order (QDRO) can be described as a written document that indicates that a person – spouse or ex-spouse – is entitled to a portion of the retirement benefits and assets. The QDRO provides specific instructions regarding how divorcing couples would share their retirement savings. 

Depending on the actual amount available in the retirement plans, your legal representative can petition a QDRO to achieve the following: 

  • Prevent your estranged partner’s employer from paying out the retirement savings directly to your soon-to-be ex-spouse. 

  • Prevent your estranged spouse from withdrawing funds from the retirement plan. 

  • Inform the retirement plan administrator to transfer your portion of the retirement savings to you. 

  • Punish or hold your estranged partner accountable for withdrawing money from the retirement accounts. 

A knowledgeable lawyer can help you draft and file the QDRO and enlighten you about the tax and legal implications of distributing retirement assets in a divorce. 

Tax Implications of Dividing Retirement Assets 

Additionally, retirement transfers are often tax-free (non-taxable) in Kentucky. However, a 10% early withdrawal tax penalty might apply for taking a distribution from a retirement plan before attaining the retirement age (59 ½ years). Although, you may be able to mitigate or avoid the early withdrawal tax penalty if the retirement accounts and savings are distributed between the couples in accordance with the provisions of the divorce decree. 

Know Your Rights   

Dividing retirement benefits and pension plans in a divorce can be complicated and overwhelming. Therefore, getting detailed guidance from a reliable family law attorney is crucial to protect your rights and navigating key decisions. At The Berger Firm, our attorneys have the diligence and skill to assist and guide couples through the complex procedures involved in dividing marital assets and retirement savings. 

As your legal counsel, we can walk you through the legal process of dividing retirement benefits. In addition, we will advocate for your best interests, protect your retirement assets by filing a QDRO, and help you recover what rightfully belongs to you. 

Contact us at The Berger Firm today to schedule an initial consultation with experienced property division attorneys. Our dedicated team can offer you the advocacy and personalized legal counsel you need to navigate your divorce matters. We proudly serve clients throughout Covington and the surrounding areas of Greater Cincinnati and Northern Kentucky, including Newport and Florence.