IRAs: Dividing Personal Retirement Assets in Tennessee Divorce
An Individual Retirement Arrangement (IRA) is among the assets that must be divided in a Tennessee divorce when funded with wages or income earned during the marriage.
Tennessee’s Statutory Authority for the Division of Retirement Assets
Under Tennessee’s marital property laws, retirement plans, pensions, and IRAs funded during the marriage will be equitably distributed between the parties in a divorce. Whatever vested and unvested pensions, stock option rights, and employment fringe benefits that accrued during your marriage, the court has statutory authority to divide them between you and your spouse. Tenn. Code Ann. § 36-4-121.
Does it Matter Whose Name Is on that IRA for Divorce?
This may surprise you, but the husband’s or wife’s name on the personal retirement account doesn’t make it separate property. More importantly, Memphis divorce lawyers look to when IRAs are created and funded to prepare clients for the division of retirement assets. Here are a few examples of how IRAs are handled as property in a Tenn. divorce:
● Example One: Assume that the husband opened an IRA before the marriage and funded it with $15,000.00, but he did not invest anything more after the marriage. At the time of the divorce, his IRA is valued at $20,000.00. Even though some of the interest earned on his IRA occurred during the marriage, the entire account remains his separate property. As you may know, the separate property of one spouse is not subject to equitable division in the divorce.
● Example Two: In this example, assume that the wife’s IRA was funded with $15,000.00 before the marriage. She continues to make regular annual investments during the marriage, adding another $9,000.00 in principle to her IRA. At the time of the divorce, her retirement asset is valued at $30,000.00. A forensic accountant in this case can calculate the earnings on the pre-marital portion ($15,000.00), which remains the wife’s separate property. And then calculate the investment earnings on the marital contribution ($9,000.00). This is the portion subject to equitable division.
● Example Three: Assume both husband and wife opened separate IRAs after they married. At the time of the divorce, his IRA is valued at $15,000.00 and her IRA is valued at $14,500.00. Because the difference between these accounts is $500 and both IRAs are marital property, the parties could settle by agreeing to keep their own accounts in the divorce, with husband transferring an equalizing payment to wife in the amount of $250.00.
Not every divorce involves substantial marital assets, retirement accounts, and pensions, but many do. To learn more about the equitable distribution of marital property in your divorce, visit Tennessee Property Division Divorce Laws & Factors | Answers to FAQs.
The division of assets (and debts, too) in a Tennessee divorce can be a complicated process, the result of which will influence your future lifestyle and financial stability long after the court proceedings are over. Our Memphis divorce lawyers at the Miles Mason Family Law Group know precisely how to identify, classify, and value IRAs, 401(k)s, pensions, fringe benefits, stock option rights, and all other assets in preparation for divorce negotiations and the final property division. To arrange for a confidential consultation with a member of our experienced legal team, call us at 901-683-1850 today.