How Retirement Plan Assets Are Divided in a Divorce

A lot can depend on the type of plan you have

A couple discusses marital asset allocation before a divorce.

Andrii Zastrozhnov / Getty Images

Retirement assets can be marital property, subject to division between spouses in a divorce, just as your home and your bank accounts are. But the rules for dividing retirement accounts can be tricky. Both state and federal tax laws can affect when and how assets are divided when spouses part ways.

Key Takeaways

  • Contributions to retirement accounts made during the term of the marriage, as well as growth on those contributions, are considered marital assets.
  • A division of individual retirement accounts (IRAs) can be ordered in a divorce decree or a property settlement agreement that's been recognized by the court.
  • Qualified plans such as 401(k)s require a document called a “qualified domestic relations order” (QDRO) to be divided.
  • A valid prenuptial or premarital agreement can override state law, but a spouse can challenge the agreement and potentially get it invalidated.

What Happens to Retirement Accounts in a Divorce?

Marital property is anything you earn, purchase, or acquire during the course of your marriage—although most states exempt gifts that are specifically given to just one spouse. It doesn’t matter if a retirement account is held in just one spouse’s name. It’s still marital property and can be divided in a divorce if it was earned, established, and contributed to during the term of the marriage.

"The contributions that were made to the retirement account during the marriage are considered marital property, as well as the growth on those contributions," Rachael Burns told The Balance. Burns is a Certified Financial Planner and Certified Divorce Financial Analyst at True Worth Financial Planning in Folsom, California.

Only the portion earned during the marriage would be available to a non-earning spouse. You might have contributed to a 401(k) for 20 years at the time you and your ex decide to part ways, but your ex would only be entitled to a share of half the asset if you were married for just 10 of those 20 years.

This presumes that spouses haven’t agreed to a different arrangement. An asset might not be divisible in a divorce if spouses have entered into a prenuptial or premarital agreement, waiving their rights to one or more assets.


A prenup can effectively override state law regarding property division, but it may be challenged in court for certain reasons, such as if it was entered into under duress.

The division of retirement assets can be subject to rules and laws that don't apply to other types of assets, and they can vary depending on the type of asset you hold.

Individual Retirement Accounts (IRAs)

Dividing an IRA can be easier than dividing another type of retirement asset. The Internal Revenue Code (IRC) provides that division of an individual retirement account (IRA) can be ordered in a divorce decree or a marital property settlement agreement that’s been approved by a family court and incorporated into a divorce decree or judgment.

It’s a “transfer incident to divorce." It’s that simple, assuming the document includes the necessary information for the financial organization to transfer a portion of the asset to the other spouse. You won’t have to pay taxes on those IRA assets, since they’re being moved into your IRA account.


The receiving spouse must have or open an IRA of their own to receive the funds.

Contributions made to an IRA are normally deductible, but you won’t be able to claim a deduction for any contributions you might have made to your ex’s IRA if your divorce decree is ordered on or before the last day of the tax year in which you made the contribution. You can still make deductions for any contributions you made to your own IRA. The transfer itself won’t be subject to income tax, however.

401(k)s and Other Qualified Plans

Division of a 401(k) or other “qualified” plan can be much more complex because qualified plans must meet the terms of Section 401(a) of the IRC. These plans are generally sponsored and offered by employers. "Typically, an employer-sponsored retirement plan like a 401k, 403b, or 457 requires a QDRO to split the assets," Burns said. “A QDRO isn't necessary to split an IRA, Roth IRA, or other individual retirement account.”

A 401(k) can't be divided between spouses based simply on a court-issued divorce decree or court-approved property settlement agreement. This type of asset can only be transferred via a qualified domestic relations order or “QDRO" and it must be accomplished according to the plan administrator’s guidelines.

A QDRO is a domestic relations order that allows a spouse or other “alternate payee” to receive a portion of a 401(k) in which they are not a participant. Your property settlement agreement alone isn’t considered to be a domestic relations order until a state court has signed off on it and included reference to it in a decree.

How Does a QDRO Work?

A QDRO authorizes the plan administrator to pay a portion of a 401(k) plan or other qualified plan to an ex-spouse, a minor child, or another dependent. It effectively approves and enforces the asset-related terms of a divorce decree or judgment, or a court-approved property settlement agreement.

A QDRO typically is a separate document that must be submitted to the administrator along with the decree that officially terminates the marriage. It doesn’t technically become “qualified” unless and until the plan accepts it, and it must contain certain specific language and information to meet the guidelines and provisions of the Employee Retirement Income Security Act of 1974 (ERISA).


Some divorce attorneys will decline to draft a QDRO by themselves, and will instead seek the assistance of a qualified CPA or accounting firm.

A QDRO legally recognizes that someone other than the participating spouse has a right to a portion of the benefits of the plan according to a decree or judgment that relates to marital property rights. It must also specifically cite what portion of the asset must be transferred.

Receiving Distributions From an Ex-Spouse’s Retirement Plan

Exactly how you or your ex will receive retirement distributions depends on the nature of the plan or account that’s being divided. The decree and/or property settlement agreement should also clearly state how distributions will be divided.

IRA funds are often transferred to a new IRA that’s opened in the receiving spouse’s name, or into an existing account in their name if they already have one. The original IRA would not be dissolved. Its remaining balance would remain in the ownership of the original account-holder spouse.

Distribution of the receiving spouse’s share of a 401(k) can depend on the plan administrator. Some will allow the receiving spouse to open and establish their own account within the plan, while others require that the funds be taken as a distribution or be rolled over into an IRA.


The receiving spouse generally has the right to choose whether to take the distribution or make a rollover, or to establish an account within the plan, if the plan allows this.

How To Update Beneficiaries After a Divorce

During or after a divorce, make sure you change or update the beneficiary designations on your retirement account after the transfer to your spouse has been finalized. It’s for your own protection and can help you avoid potential complications later. You can usually take care of this yourself, without the assistance of a tax professional or attorney.

In general, it’s a simple matter of submitting new beneficiary forms to your plan administrator or employer, and naming one or more new beneficiaries other than your spouse if they were the beneficiary before your divorce. The plan administrator or your employer might ask you for a copy of your divorce decree or settlement agreement to support your request for the change.

The Internal Revenue Service (IRS) warns that you should take care of this loose end in the same year in which your divorce is legally finalized. Otherwise, your ex may still be treated as the beneficiary of your account for that year and any years after that they are listed as a beneficiary.

Frequently Asked Questions (FAQs)

Is it better to retire before or after a divorce?

There's really no concrete answer to this question, because every family’s financial situation is unique. It can depend on the type of retirement and non-retirement assets the family owns, any investment income, potential Social Security income, and each spouse’s employment situation.

Can my 401(k) be split in a divorce?

A 401(k) can only be split in a divorce pursuant to a qualified domestic relations order (QDRO) although other types of retirement accounts aren’t subject to this rule.

Can I avoid the IRS penalty for early withdrawal on retirement accounts in a divorce?

Alternate payees under the terms of a QDRO aren’t subject to the 10% early withdrawal penalty tax that’s normally imposed when distributions are taken from a retirement plan before the age of 59½, unless they choose to rollover the funds into an IRA. This rule doesn’t apply to IRAs.

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  1. FINRA. “Will Your Financial Accounts Survive Your Divorce?

  2. New York City Bar Legal Referral Service. “Prenuptial Agreement.”

  3. IRS. “Publication 504, Divorced or Separated Individuals.”

  4. “Qualified Retirement Plan.”

  5. U.S. Department of Labor. “FAQs About Qualified Domestic Relations Orders.” Page 1.

  6. Pension Rights Center. “What Women Facing Divorce Must Know About Spousal Retirement Benefits.”

  7. Ray A. Knight and Lee G. Knight. "QDROs Demand the Attention of CPAs.”Journal of Accountancy. August 2014.

  8. IRS. “Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs).”

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