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How Are Retirement Assets Distributed?

If you and your spouse are going through a divorce, there is a good chance that the thought of retirement is not the top thought in your mind. While not a tangible piece of property, retirement benefits earned by either spouse during marriage can be a valuable item and it belongs to both spouses.  Regardless of how old you are when you are going through divorce proceedings in New Jersey, it is important to keep note of any retirement benefits shared by you

and your spouse. In most instances, your retirement benefits turn out to be the assets of the highest value shared between you and your spouse. If you and your lawyer do not make divisions of these retirement assets a top priority, then you could eventually suffer tax consequences and other significant penalties.

When spouses divorce, any retirement benefits earned during the marriage must be shared or offset. If the divorce takes place prior to one spouse receiving the benefits, ta court can choose to divide the benefits in one of two ways.

First, the court may choose to postpone the division of the benefits until the benefit is able to be paid. Waiting until the retirement benefit matures allows the value of the retirement benefit to be known which makes its division less complicated.

Second, a court may choose to allow the earner can keep the benefit while the other spouse gets to keep another asset of the same value. This method is only able to be done when the value of the retirement benefit is known.

Dividing Retirement Assets In An NJ Divorce

1040 taxes

In New Jersey, an early distribution from any qualified retirement plan may eventually result in severe income tax penalties. These would be levied on the spouse receiving the distribution from the plan. In some instances, it can also result in tax penalties for the spouse who is the account holder of the plan.

If you have quality legal advice, your lawyer can petition for a Qualified Domestic Relations Order. New Jersey residents can use this order to divide retirement assets without tax penalties for either spouse. This is a court order that requires the administrator of the retirement plan or plans to divide the account or accounts following a percentage that is predetermined by the court. The percentage that is being received by the non-account holder can be either moved into a newly established account with the same retirement company or can be rolled into an IRA.

What Plans Are Eligible?


In the state of New Jersey, there are various types of retirement plans that can be divided by a Qualified Domestic Relations Order. These plans include any 401K plans, an ERISA qualified pension plan, a Keogh plan, any defined contribution plans, as well as thrift saving plans. Profit sharing plans, defined benefit plans, tax sheltered plans, and money purchase plans are also eligible for a QDRO. There are some types of retirement plans that are not eligible for a Qualified Domestic Relations Order in New Jersey. These include IRA's.

Other Ways Of Division of Assets During NJ Divorce

Another way some divorcing parties avoid this conflict is to have their lawyers negotiate a property settlement agreement. In this instance, one spouse will give up his or her right to the percentage of pension benefits to which they are entitled. However, in exchange for giving up the benefits, the spouse will receive another asset of equal value; usually some form of property jointly owned by the couple. This is another way to prevent tax penalties from early division of pensions and other retirement assets.

Contact Villani & DeLuca, P.C.

As with any divorce related issue or expense, it is important and rather essential to have the advice and input of an experienced lawyer. Our law offices serve both Ocean and Monmouth County and are here to guide and assist you as you navigate the murky waters of divorce and divorce settlements. Once your divorce is final you do not want to have any regrets or have lost out on anything to which you were entitled under the retirement distribution laws in the state of New Jersey. Additionally, you do not want to incur any tax related consequences as a result of mishandling of the retirement benefits distribution.

Other Resources - Retirement Assets

Finding Hidden Assets In A New Jersey Divorce

What happens to Debt during an Ocean County Divorce?

Protecting Your Legal Rights

Asset Protection During Divorce In New Jersey

Please, contact our offices today to seek out advice and aid. Our experienced attorneys will provide you with the answers you are seeking and work tirelessly to ensure that your assets are protected and equally divided. Call Villani & DeLuca, P.C. at 732-751-4991today!

Vincent DeLuca, Esq.

As a founding partner at Villani & DeLuca, Vincent DeLuca is one of only a few Certified Matrimonial Law Attorney in Ocean County, New Jersey. Mr. DeLuca has helped many clients navigate the delicate details of their own divorce. Mr. DeLuca is also a trained divorce mediator and collaborative divorce attorney. Call today at (732) 751-4991 to speak to Mr. DeLuca or one of our experienced NJ Divorce Lawyers.