IRAs, among other assets, can be subject to division between two spouses during a divorce. How much of the account each person receives will depend on various factors outlined in North Carolina statute § 50-20. A judge can use their discretion to decide what’s equitable based on the circumstances.
North Carolina is an equitable distribution state. That means the courts typically split IRAs and other property in a way that’s fair for each spouse. However, equitable doesn’t always equate to dividing everything down the middle.
A 50/50 split might not be fair if one spouse makes significantly more money than the other. The judge assigned to your case will review all contributing factors before deciding how to equitably distribute the funds in your or your spouse’s IRA account.
Marital Property vs. Separate Property
It’s critical to determine whether an asset in a marriage is marital property or separate property.
Marital property is any real and personal property one or both spouses currently own that they acquired during the marriage but before the date of separation. If you or your spouse opened an IRA account while married, the funds could be subject to equitable distribution.
Separate property is personal and real property one spouse owned before the marriage or acquired while married as an inheritance or gift. An IRA that was opened and funded prior to the marriage date might be considered separate property. However, it could become marital property if either spouse used any marital property to fund the account.
Typically, state law considers an IRA marital property. That means each spouse could have rights to a portion of the funds. It gets tricky if someone started contributing to their IRA account before entering into a marriage. The court might determine that only a portion of the funds are subject to division between the spouses.
Factors Used to Determine Equitable IRA Distribution
The court will divide all marital property by using the net value unless it decides dividing the asset equally is not equitable. A judge can consider any factors under North Carolina statute § 50-20(c) to divide the funds in an IRA:
- Any direct contribution made during the marriage to increase the value of the IRA acquired before getting married
- The income, liabilities, and property of each spouse on the date the IRA will be divided
- Any obligation for support from a prior marriage
- Age and health of each party
- Duration of the marriage
- The expectation of a retirement account that is not marital property
- Any direct or indirect contribution, equitable claim, or interest in acquiring the IRA by the person without title, including expenditures or joint efforts and services and contributions
- Tax consequences of dividing the IRA funds
- Acts of either spouse to develop, maintain, expand, or preserve, or neglect, waste, convert, or devalue the IRA account after the separation date but before distributing the funds
The judge has complete discretion to use any additional factors they believe are fair in deciding how to split a spouse’s IRA during the divorce.
What You Can Do to Avoid Settling the Matter in Court
It’s always best to reach an agreement about how to divide an IRA without going to court. If you and your spouse can settle on the terms of asset division, you could avoid a judge making the decision for you. When you have to bring your case to court, you have little to no control over the outcome.
A mutually beneficial arrangement does not have to involve distributing funds in an IRA equally. One of you might determine that keeping the account in exchange for another asset works in favor of you both.
For example, you could negotiate with your spouse to keep the IRA you acquired during the marriage and allow them to keep the marital home. Or you might decide to give up the funds to your spouse if they let you pay less in child support payments.
If you’re going through a divorce and want to learn about your legal options for dividing an IRA, contact Marshall & Taylor PLLC immediately. We will protect your rights and fight to try to achieve your desired outcome.
Whether you worked hard to put money into the account or spent years caring for your children so your partner could plan for both of your retirements, you deserve to walk away with your fair share of the funds.
You should not attempt to handle divorce proceedings yourself. You need an experienced and knowledgeable divorce lawyer by your side to guide you through the process and look out for your interests. Marshall & Taylor PLLC will work hard to meet your needs, so you don’t end up with nothing.