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Is a retirement savings account separate property during divorce?

On Behalf of | Dec 13, 2023 | Family Law

People typically want to preserve as much of their assets as they can during a Washington divorce. Generally, anything that is part of the marital estate is subject to property division laws. The state treats resources acquired during marriage as community property that belongs to both spouses. The same approach also applies to debts.

However, certain assets and financial obligations could be the separate property of either spouse. Assets owned prior to marriage, gifts and inheritances can all be separate property that people can preserve during a divorce. People can also set aside assets as separate property if they sign marital agreements. Although spouses have to report their separate property, they usually don’t need to worry about dividing it during the divorce.

Many retirement savings accounts belong to a single individual and may relate to their employment. People often start them before getting married and continue contributing to them during a separation. Does that mean that someone’s retirement account is their separate property during a Washington divorce?

The name on the account isn’t what matters

For the purposes of property division during a divorce, account ownership isn’t the most important consideration. Instead, what matters the most is when people made contributions to the account. Even if someone started their retirement savings account prior to marriage, whatever they added to it during the marriage is likely subject to division.

Both spouses have a partial interest in the amounts added to the account during marriage, including employer-matching contributions that could be part of someone’s compensation package. People need to determine what amount of the account balance is separate property and what is marital property. Those figures can help someone better negotiate as they prepare for Washington divorce proceedings.

Sometimes, spouses can reach property division settlements that allow them to keep certain assets by giving up their right to other property. Even if someone does need to divide their retirement savings account, they may be able to avoid penalties and taxes by using the right paperwork to do so.

Learning about what assets are subject to division may help people better prepare for an upcoming Washington divorce.