How Are Retirement Assets Handled During a Divorce in Maryland?

Divorce is a complex process, and the division of assets can be one of its most challenging aspects. In Maryland, retirement assets are a significant part of this equation, often representing a substantial portion of a couple’s wealth. Understanding how these assets are handled during a divorce is crucial for anyone navigating this difficult process.

Equitable Distribution

Maryland follows the principle of equitable distribution when it comes to dividing marital property, including retirement assets. Unlike community property states, where assets are split 50/50, equitable distribution aims to divide assets fairly, though not necessarily equally. The court considers several factors to determine what constitutes a fair division.

Identifying Marital vs. Non-Marital Property

The first step in dividing retirement assets is to distinguish between marital and non-marital property. Marital property includes assets acquired during the marriage, regardless of whose name is on the account. Non-marital property includes assets acquired before the marriage, through inheritance, or as a gift to one spouse.

For retirement accounts, this means contributions made and the growth of these accounts during the marriage are considered marital property. Conversely, contributions made before the marriage and their growth are typically considered non-marital property. However, if non-marital assets are commingled with marital assets, they can become part of the marital property.

Types of Retirement Assets

Retirement assets come in various forms, including 401(k) plans, IRAs, pensions, and other employer-sponsored plans. Each type of retirement asset requires different handling and legal considerations.

401(k) and IRA Accounts: These accounts are often split using a Qualified Domestic Relations Order (QDRO). A QDRO is a legal order that allows retirement plan administrators to divide the assets without penalty. The QDRO specifies how the retirement assets are to be divided and ensures that both parties receive their fair share.

Pensions: Pensions can be more complex to divide due to their future payout structure. The present value of the pension is often calculated, and the non-employee spouse may be entitled to a portion of the payments once the employee spouse retires.

Valuation and Division

Accurately valuing retirement assets is crucial. This process often requires the expertise of financial professionals, especially for pensions and other defined benefit plans. The court considers the current value and the future value of these assets, ensuring a fair distribution. Once valued, retirement assets can be divided in different  ways:

• Immediate Offset Method: One spouse receives a lump sum or other marital assets equal to their share of the retirement assets.

• Deferred Distribution Method: The court orders a division of the retirement benefits to be paid out when the benefits are accessible, typically upon retirement.

Expert Legal Advice in Maryland 

Handling retirement assets during a divorce in Maryland requires careful consideration and legal guidance. By understanding the principles of equitable distribution, distinguishing between marital and non-marital property, and properly valuing and dividing these assets, couples can navigate the process more smoothly. 

Seeking the help of legal and financial professionals is essential to ensure a fair and equitable division of retirement assets. At The Law Office of Sandra Guzman-Salvado, we’re here to guide you through every step of the process. Our legal team will provide you with the experienced legal support and referrals for financial guidance as well. Contact our Maryland divorce attorneys at The Law Office of Sandra Guzman-Salvado at (301) 340-1911 to schedule a consultation.