Are retirement accounts separate property in Indiana divorces?

On Behalf of | Dec 1, 2022 | Property Division

Your retirement savings will have to pay your living expenses for decades when you have no other source of income. You may have contributed thousands of dollars annually to your retirement savings account to prepare for the future. Often, those in well-compensated careers may have retirement benefits offered through their employers, such as matching deposits or annual retirement account contributions based on their job performance.

Your retirement savings may feel like the only protection you have for your future. You may also feel a sense of attachment to those savings because they represent years of hard work. Will your retirement savings be your separate property in an Indiana divorce?

The name on the account doesn’t make it a separate asset

People frequently think that property and accounts held only in one spouse’s name will be separate property in the event of a divorce. Given that your retirement account is partially an employment-related job benefit, you might think that the Indiana courts would treat it as separate property in your divorce so that you won’t have to share it with your spouse.

However, when you earned the income that funded the account is what matters the most. While you may have started the account and made deposits into it before your marriage, the amounts added to the account during the marriage will likely be marital property that you have to divide. After all, your marital income is marital property that both of you share.

Although your spouse never directly contributed anything to the retirement savings that you have, they can still claim some of what you have accrued in your divorce proceedings.

How can you protect your retirement savings?

If a judge orders you to divide your retirement savings account in an Indiana divorce, having a lawyer draft a qualified domestic relations order (QDRO) will protect you from the fees and penalties that often diminish retirement savings after an early withdrawal from the account.

On the other hand, you could potentially negotiate a property division settlement with your spouse that allows you to retain sole ownership of the retirement account in consideration of other assets that they want to keep in the divorce. Identifying what property you have to share and what you can protect for yourself will lead to a more effective divorce strategy.

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