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Attorney Theresa D. Childress April 2, 2025

Dividing Retirement Accounts During Divorce

Divorce is extremely emotionally draining. Add the financial aspects into the mix, and there's a whole other layer of challenges. One of the most complicated financial issues in a divorce is the division of retirement accounts. Whether you have a 401(k), pension, or IRA, understanding how these assets are divided is crucial. 

If you're going through a divorce in Shelby County, Tennessee, you need legal guidance to avoid costly mistakes. Retirement assets are often among the largest marital assets, and without proper legal representation, you could lose out on what you're entitled to. 

Having a compassionate and experienced family attorney by your side can make all the difference when it comes to protecting your financial future. Read on to learn more information.

How Are Retirement Accounts Divided in Tennessee?

Tennessee follows equitable distribution laws, which means marital property is divided fairly but not necessarily equally. Retirement accounts, if acquired during the marriage, are considered marital property and are subject to division. However, determining what portion of a retirement account is marital versus separate property can be complicated.

A family attorney can help clarify which portions of a retirement account belong to the marriage and which belong solely to one spouse. Factors like the length of the marriage, contributions made before the marriage, and overall financial standing of each spouse play a role in how assets are divided.

Types of Retirement Accounts and Their Division

Different types of retirement accounts require different legal approaches when dividing them during a divorce. Here’s how the most common types are handled:

401(k) and 403(b) Accounts

These employer-sponsored retirement accounts are among the most common assets divided in a divorce. Since they often contain both pre- and post-marital contributions, it’s important to determine how much of the account is subject to division.

To divide a 401(k) or 403(b), the court typically issues a Qualified Domestic Relations Order (QDRO). A QDRO is a legal document that instructs the plan administrator on how to distribute funds to the ex-spouse without triggering taxes or penalties. Without a QDRO, an early withdrawal from a retirement account could result in a 10% tax penalty, according to the IRS.

Pensions

Pensions are often more complicated to divide because they provide monthly payments rather than a lump sum. If a pension was earned during the marriage, the non-employee spouse is usually entitled to a portion of the future payments. Courts often use actuarial calculations to determine the exact division.

A family attorney can work with financial professionals to assess the pension’s value and negotiate a fair distribution. Without legal guidance, you could receive less than what you're entitled to.

Individual Retirement Accounts (IRAs)

Unlike employer-sponsored accounts, IRAs don’t require a QDRO for division. Instead, an IRA can be divided using a transfer incident to divorce, which allows funds to be transferred without tax penalties. However, if not handled correctly, withdrawals could be taxed as income.

A knowledgeable family attorney can help structure the division to minimize financial consequences and protect your retirement savings.

Key Factors Courts Consider in Retirement Asset Division

When determining how to divide retirement accounts, courts in Shelby County, Tennessee, consider several factors, including:

  • Length of the marriage – Longer marriages often result in a more significant portion of retirement assets being classified as marital property.

  • Each spouse’s financial situation – If one spouse has significantly more financial resources, the court may adjust asset division accordingly.

  • Contributions to the marriage – This includes both financial contributions and non-monetary contributions, such as one spouse staying home to raise children.

  • Age and health of each spouse – Courts consider whether one spouse will need additional resources for medical care or retirement.

Common Mistakes to Avoid When Dividing Retirement Accounts

Dividing retirement assets is a legal and financial process that requires careful handling. Here are some common mistakes people make:

Not Getting a QDRO for Employer-Sponsored Plans

Failing to obtain a QDRO can result in tax penalties and lost benefits. A family attorney can draft the necessary documents to protect your interests.

Overlooking Tax Implications

Some retirement accounts are taxed upon withdrawal, while others are not. For example, Roth IRAs grow tax-free, whereas traditional IRAs and 401(k)s are taxed when funds are withdrawn. Understanding these tax differences is essential when negotiating asset division.

Withdrawing Funds Prematurely

Some individuals make the mistake of withdrawing funds from a retirement account to pay for divorce expenses. Early withdrawals can trigger penalties and reduce your long-term financial security. A family attorney can help explore alternative solutions.

Assuming a 50/50 Split Is Automatic

Since Tennessee follows equitable distribution laws, a straight 50/50 division isn’t assured. Courts consider various factors to determine a fair distribution.

How a Family Attorney Can Help

Divorce is stressful, and the financial aspects can be overwhelming. Having an experienced family attorney in Shelby County, Tennessee, can make a significant difference in your case. Here’s how I can stand by you throughout your case:

  • Legal guidance on asset division – An attorney can explain your rights and help negotiate a fair settlement.

  • Drafting legal documents – From QDROs to transfer documents, a lawyer can handle the paperwork to avoid errors and delays.

  • Financial protection – A lawyer can work with financial experts to protect your long-term financial interests.

  • Negotiating settlements – If you prefer to avoid court, a family attorney can mediate and negotiate a division that works for both parties.

Tennessee-Specific Laws on Retirement Account Division

Tennessee law treats retirement accounts as marital property if contributions were made during the marriage. However, Tennessee does not have mandatory alimony guidelines, meaning retirement accounts sometimes play a role in long-term financial support.

According to a report from the U.S. Department of Labor, mistakes in dividing retirement plans during divorce can lead to financial losses and unnecessary tax penalties. A family attorney can help avoid these issues and secure a fair settlement.

FAQs

Can I Cash Out My Portion Of A Retirement Account After Divorce?

It depends on the type of account and the division process. If a QDRO is used, you may be able to roll funds into another retirement account without penalties. However, early withdrawals could result in taxes and penalties.

What Happens If My Ex-Spouse Refuses To Sign A QDRO?

If your ex refuses to cooperate, the court can intervene and order compliance. A family attorney can assist in getting the necessary orders enforced.

Are Military Retirement Benefits Handled Differently?

Yes, military retirement benefits are subject to federal laws like the Uniformed Services Former Spouses' Protection Act (USFSPA). A family attorney familiar with military divorces can guide you through the process.

Do I Have To Share My Retirement If I Was The Sole Contributor?

If contributions were made during the marriage, the retirement funds are considered marital property and subject to division. However, any funds acquired before the marriage typically remain separate.

Contact My Firm For Help

If you're facing a divorce in Memphis, Lenox, Nonconnah, Germantown, Bartlett, Arlington, or Millington, protecting your financial future should be a top priority. Retirement accounts are often among the most valuable assets in a marriage, and dividing them incorrectly can have lasting consequences.

Call me, Attorney Theresa D. Childress, today to discuss your case and start securing your financial future. I look forward to hearing from you.


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