Asset division is a major component of the divorce process, with retirement assets often at the center of negotiations. This leads many people to wonder whether their spouse is entitled to a portion of their retirement funds.
The answer largely depends on the state you live in and when you acquired your retirement funds. If you live in Arizona, there’s a strong chance that your spouse will be entitled to some of your retirement in the divorce.
How Arizona’s community property law affects retirement division
Arizona is a community property state. This means that any assets acquired during the marriage are equally owned by both spouses, even if only one spouse’s name is on the title or account.
Under Arizona’s community property laws, any retirement funds accumulated during a marriage are considered marital property and subject to 50/50 division in a divorce. This includes 401(k)s, IRAs, pensions, and other retirement plans.
Alternatively, if one spouse opens a retirement account before getting married, any funds — including company matching — that they add to the account before marriage are that spouse’s separate property.
Determining if your spouse is entitled to your retirement
Arizona’s community property laws dictate how to handle marital property and separate property, but these guidelines are irrelevant if your spouse’s name is on the retirement account. If that’s the case, your spouse is entitled to half of your retirement funds regardless of when they were acquired.
If your spouse’s name isn’t listed on the retirement account, then it’s important to determine when you acquired the funds. If it was all accumulated during the marriage, 100% of the funds are marital property and your spouse will most likely be entitled to half.
Things become a bit more complicated if you acquired some of your retirement funds before the marriage. In this case, you’ll need to calculate how much of the retirement funds are separate property and how much are marital property.
The portion that’s considered marital property will be further split 50/50, while the separate property portion will remain entirely with you.
Ways to protect your retirement assets
You worked hard to build your retirement fund and the last thing you want is to lose half of it in the divorce process. Fortunately, there are a few possible strategies you can pursue to protect your retirement assets.
Signing a prenuptial agreement
A prenuptial agreement (informally known as a “prenup”) is a contract signed by both partners before marriage outlining each party’s rights in the event of a divorce. If you have a prenup in place, its terms will override Arizona’s community property laws.
A common clause included in prenups is a waiver stating that each spouse waives their right to any retirement funds acquired by the other during the marriage.
This asset protection option is only available if you aren’t yet married, but it’s the most certain way to keep your retirement funds safe.
Negotiating an alternative asset division agreement
If there’s no prenuptial agreement, the next best option is to negotiate an out-of-court agreement with your spouse. Like a prenup, this agreement takes precedence over Arizona’s community property laws as long as both parties agree to its terms.
This option requires some creative give-and-take between both parties. For example, you could offer to keep the majority of the retirement funds in exchange for giving your spouse a larger share of other marital property.
The amount of negotiation that’s possible depends on a variety of factors, including both parties’ willingness to compromise and the overall value of marital assets.
An attorney can further assist you
Whether you’re considering a prenup, entering negotiations with your spouse, or just want more information about how your retirement may be divided, the guidance of a divorce lawyer in Tempe can be invaluable.
The outcome of your divorce settlement will affect your financial security for years to come. A lawyer can ensure that you make informed decisions along the way. Start protecting your future today by contacting Blanchette Law PLLC at (602) 881-1748.