What happens to retirement savings in a Tennessee divorce?

On Behalf of | Oct 19, 2023 | Divorce

Most married couples in Tennessee share just about everything with each other. They may both deposit their paychecks into the same checking account and mutually contribute toward the maintenance and purchase of their marital home. They will likely also plan to retire together. The savings plan they develop will likely reflect sharing retirement costs and resources. It can be difficult to untangle those shared resources during a Tennessee divorce.

Oftentimes, people make contributions to a retirement account linked to their employment. It is common for each spouse to have their own retirement savings account. What is likely to happen to those savings during a divorce in Tennessee?

Couples likely have to share their savings

Some people plan ahead for the possibility of divorce by negotiating marital agreements. Occasionally, retirement savings will have protection as separate property because of an agreement between the spouses. For most couples contemplating divorce in Tennessee, retirement savings will be subject to division. Even if someone started the retirement account before getting married, whatever they contributed to the account during the marriage is part of the marital estate.

It does not matter that the account is solely in one spouse’s name and that they were the only person to make contributions to it. They will still need to disclose the full value of the account, although they could protect deposits made prior to marriage as separate property. Either through divorce negotiations or a judge’s property division order, couples may need to split their retirement savings.

When dividing an account, divorcing couples will use a qualified domestic relations order (QDRO). One lawyer will draft the document, the courts will approve it and then the person managing the retirement account will divide it into two accounts according to the instructions in the document. When people follow the process appropriately, a QDRO eliminates taxes and penalties that could substantially diminish the total value of the retirement savings.

Although people cannot prevent the inclusion of their retirement savings in the marital estate in most cases, those who reach their own property division settlement will have more control over the final terms of the divorce. Knowing what will happen to the most valuable resources married couples share may help them have more realistic expectations for the outcome of the property division process as a whole, which is one of the many reasons why seeking legal guidance when divorcing is advisable.


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