When clients come in to talk with us about divorce, we are often asked many questions about retirement assets. Often, only one spouse has retirement assets and the other spouse is concerned that he/she will lose the right to a share of those assets if they get divorced. This is often the case with a stay-at-home parent, who gave up his/her career to raise the parties’ children. We hear from many of these potential clients that their spouse told them they had no right to their retirement assets if they get divorced because he/she did not contribute anything to those assets. This is simply not true. In New Hampshire, all assets are “marital assets”. This includes assets that are titled to one spouse individually and assets that are titled to both spouses jointly. Under New Hampshire law, marital assets are required to be divided “equitably”, and there is a presumption that equal is equitable. Therefore, most assets are divided equally.
Retirement assets, especially in a long-term marriage, are typically divided equally. This includes contributory plans like 401k plans and defined benefit plans like pensions. Most retirement plans that are received as a benefit of employment are “qualified plans” under the IRS rules. If they are qualified plans, they are required to be divided by “Qualified Domestic Relations Order (QDRO)”. A QDRO is a court order that tells the retirement plan to divide the employee’s interest in the retirement plan in a specific way. QDROs must meet certain requirements and therefore, consulting with counsel is important to make sure the QDRO is properly drafted.
Non-qualified plans do not need a QDRO to divide them. An example of a non-qualified plan is an IRA (Individual Retirement Arrangement or Account). To divide a non-qualified plan, most plans require a divorce decree along with a letter of instruction.
Federal, state and municipal government plans can be qualified or non-qualified plans. They are typically established by a statute and therefore the terms of the statute control how the plans are divided. These statutory plans have very specific requirements that must be met and therefore, parties need to be careful to make sure they meet those requirements to properly divide the plan.
If you have questions about dividing retirement assets or the specific requirements to divide your retirement assets, contact one of the attorneys at Parnell, Michels & McKay, PLLC. We can also assist you in preparing a QDRO to divide your qualified plan following a divorce.