Spouses contemplating divorce often have pressing questions about the process. They worry about what property they have to split with their spouses and how long it may take to recover financially after the end of a marriage.
As an equitable distribution state, New Jersey expects spouses to divide their property fairly between themselves. If they cannot do so on their own, then a judge can review financial records to fairly divide marital assets and debts. Some property is not subject to division during divorce proceedings because it remains the separate property of one spouse.
Separate assets are not part of the marital estate and therefore have protection from division. Many spouses start looking at their holdings to determine what they can retain after a divorce. Is a retirement savings account or pension in the name of one spouse considered separate property?
Separate accounts may still be marital property
It seems logical to assume that assets held in the name of one spouse belong directly to that spouse. However, the date of acquisition or the source of funds used to acquire resources matters more than the name on the ownership paperwork. Typically, property acquired during the marriage is marital property even if only one spouse has their name on the ownership documents.
Bank accounts funded with marital income are usually marital property, even if one spouse has never contributed anything to the account. That same rule applies to retirement savings. While only one spouse may have their name on the 401(k) that they fund with pre-tax income, the use of marital income to fund the account makes it at least partially divisible during divorce proceedings.
The account holder may have to review the records of account contributions to determine what amount of the balance is marital and what amount is separate property that they contributed before the marriage. In some cases, spouses may need to directly divide retirement accounts or pensions. Other times, they may need to employ more creative solutions.
Alimony can help spouses address a pension that they cannot divide directly during a divorce. The allocation of other marital assets or debts can also help offset the value of retirement savings. Spouses who understand what assets they have to divide and what they can protect when they divorce can start planning for the future and may find it easier to negotiate because they understand what they can preserve and what they must share.
Having a source of accurate information about divorce proceedings can help people prepare for the process ahead and push for the best outcome given their circumstances. The sooner people begin reviewing their assets and debts, the easier it may be for them to establish and achieve appropriate goals during an upcoming divorce.