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What happens to retirement accounts in Maryland divorces?

The longer you have stayed married, the more intertwined your finances have become with your spouse’s. Married couples share bank accounts, paychecks and houses. You also probably plan to share retirement savings and plan to split the expenses when you live on a fixed income.

Those plans will obviously need to change when you file for divorce. You may find yourself wondering if your retirement savings are at risk in divorce proceedings. Especially if your employer offers benefits like contribution matching for your retirement savings account, the vast majority of retirement savings may be in an account related to your work and held in your name.

Do you get to keep your retirement saving as separate property in a Maryland divorce?

Retirement accounts and pensions are often marital property

While it is not the answer that people want to hear, the truth is that Maryland frequently treats retirement accounts as shared or marital property. A part of the account may be separate property owned by one spouse. The contributions that you and your employer made prior to marriage will remain solely yours.

However, any amount earned or deposited during the marriage is marital property subject to division under state law. In some cases, the courts may expect you to divide the account. Other times, you just have to factor the value of the marital portion of your retirement savings into property division decisions. If you do have to divide the actual account, you can at least use a qualified domestic relations order (QDRO) that will help you avoid the taxes and early withdrawal penalties you might otherwise have to pay.

You can avoid splitting the account in some situations

Many couples manage to settle their property division matters outside of court, which means they only need a judge to approve the way they split their property rather than to make decisions about how to do so. You could potentially reach an agreement with your ex that allows you to retain the retirement account or pension, but you will likely have to offer them something that is a priority from their perspective in your divorce.

Understanding the rules that apply when dividing your biggest asset can help you negotiate a better outcome in your divorce.