You and your spouse intended to grow old together, and your financial preparation reflects that. Now that you are divorcing, you are prepared to divide your property, but you may not know what will happen to your retirement accounts.
Divorcing couples usually have a lot of questions about the future of their retirement accounts. Are retirement accounts equally split between spouses? Does the working spouse retain more, or all, of the retirement benefits? How will the non-working spouse find financial security?
How is property divided in Michigan?
Like most states, Michigan follows equitable distribution laws. This means that all marital property is divided fairly between spouses, but not necessarily equally. The court will evaluate your family's unique circumstances, including each spouse's career, earning potential and health to determine an arrangement that can fairly support both people after divorce.
Are retirement accounts eligible for division?
Retirement accounts are considered marital property and are subject to division. While only one spouse earned the retirement benefits, they are treated like income that was intended to support the entire family. The court may choose to divide retirement assets in half, or to award one spouse a larger portion than the other. They will do what they think is fair given your situation and how they have chosen to divide the rest of your assets and debts.
How can the non-working spouse collect retirement assets?
Many divorcing spouses establish a Qualified Domestic Relations Order (QDRO) to smoothly distribute retirement assets to the non-working spouse. A QDRO tells the working spouse's employer where to send a portion of the retirement assets, and how much. This ensures that the non-working spouse receives the correct, and full, amount of the retirement account that they are entitled.
How can spouses develop a financially stable future?
Divorce will impact your financial situation, but it does not have to derail it. You may worry that you will not be able to retire for a long time after divorce. Consult with a financial adviser to develop a financial plan. They can help you develop a budget and explore your options to comfortably start over.