How Maryland Courts Handle Retirement Accounts During Divorce

When a couple divorces, splitting up their assets can prove to be quite a challenge. Although many people talk about how houses and money in their bank accounts might be divided, there are cases where retirement accounts prove to be the most valuable asset in the couple’s marriage. As such, retirement accounts must be divided equitably between the two spouses. In this article, we’ll discuss how the Maryland courts divide retirement accounts during divorce. 

Marital versus non-marital retirement accounts 

Equitable distribution is the law of the land in Maryland. This means that the marital estate is divided equitably (not equally). Retirement funds are usually considered marital property so long as they were accrued during the marriage.

In such a case, where one has contributed to their 401(k) before the marriage, it is considered non-marital property and does not need to be shared. Contributions to the 401(k) that are made during the course of the marriage are viewed as marital property.

It is not always simple to establish the marital portion of a retirement fund where contributions were made before and during the marriage. 

Valuing retirement accounts in divorce 

Prior to allocating the funds from the retirement plan, the courts need to determine the amount that will be divided. The courts are tasked with examining the account balance for the retirement fund.

Determining the pension’s value is sometimes difficult since it does not provide an actual account balance but offers certain pension benefits in the future. The court might use certain formulas to determine the value of the pension benefit obtained by the spouse during the marriage.

The role of a qualified domestic relations order (QDRO) 

If the money in the retirement account needs to be split between the spouses, you can’t typically just withdraw the money like a bank account. Instead, a QDRO is required.

Using the QDRO, the retirement plan administrator is tasked with splitting the retirement accounts according to what is decided by the court.

Using the QDRO, the retirement plan administrator splits the retirement accounts in accordance with the court’s ruling. This way, money from the retirement account will be split into separate retirement accounts without penalty or tax arising from premature withdrawal.

Nonetheless, each retirement account has its own requirements for QDROs. 

Key considerations during divorce 

The division of retirement funds in Maryland is not always equal. Some of the things that courts will consider before deciding how marital property will be divided include the length of the marriage, the financial situation of the individuals involved, and what each individual contributed to the marriage.

Since there are major financial repercussions attached to retirement funds, it is essential for divorcing individuals to comprehend the value and division of their retirement funds. 

Talk to a Bel Air, MD, Divorce Lawyer Today 

Schlaich & Thompson, Chartered, represents the interests of Maryland residents during their divorce. Call our Bel Air family lawyers today to schedule an appointment, and we can begin discussing your case right away.