Most working professionals prepare for financial stability during retirement in several ways. Many might set aside some of their income in tax-deferred accounts, such as 401(k)s. Others might accrue pensions by maintaining long-term employment with one company.
Those resources are potentially at risk when people divorce. Spouses in Maryland often worry about how to fairly address retirement savings or pensions during divorce litigation or property division negotiations. Both spouses may worry about their ability to retire comfortably after a divorce. In many cases, at least a portion of one spouse’s pension or retirement savings could be subject to division.
What are the primary potential solutions for addressing retirement savings in a Maryland divorce?
Offsetting the value of the savings
Perhaps the simplest solution is to determine the marital value of the pension or savings. Then, the spouse who does not hold the account can retain other property of an equivalent value. Such arrangements do not require special documents or any complicated arrangements beyond basic financial calculations.
Dividing the account directly
It is possible to split a retirement savings account without putting savings at risk due to penalties and taxes. The use of a qualified domestic relations order (QDRO) drafted in accordance with a property division decree from the courts can facilitate a smooth division of one account into two separate accounts.
Arranging for spousal support
In scenarios where dividing the account isn’t practical or possible, as can be the case with pensions, spousal support could be a solution. Also known as spousal maintenance or alimony, spousal support involves a series of structured payments from one spouse to the other after the divorce. Spousal support can be a way to share a pension during distribution years.
Any of these solutions could be on the table during negotiations between spouses. Judges could also have the power to decide how to address retirement savings and pensions in litigated divorces. Those who feel strongly about securing a specific solution may want to consider compromising with their spouse to achieve their goals.
Discussing the most valuable marital assets and how to address them with a skilled legal team can be beneficial for those preparing for high-asset Maryland divorces. Couples may require creative solutions to reach fair outcomes when they own valuable marital property together.
