You’ve spent your working life building up your retirement through a 401(k) and now that you are getting a divorce, you don’t know what is going to happen to that retirement and the planning. There are many ways a retirement account such as a 401(k) can be treated during a divorce.

Like any other property during a divorce, it must be determined if that property is marital or separate property. The only part of the 401(k) subject to possible division in a divorce is the growth and contributions that occurred during the marriage. This means that if there was $50,000 at the time of marriage and after a 10 year marriage it is worth $300,000, only $250,000 will be subject to possible division.

There are many ways a 401(k) can be divided. The simplest way is to divide the marital portion down the middle with half staying with you and half going to your spouse. If this is not what you desire, you can trade other property you may be awarded in return for keeping the entire 401(k).

Once it is determined how much you are keeping, the funds have to be actually divided. This happens by using a Qualified Domestic Relations Order. When finalizing a divorce, it is determined which attorney will be responsible for drafting the Qualified Domestic Relations Order. Once this order is signed by the judge, it is sent to the plan administrator to properly divide the funds.

This division is not taxable to either party as it is through the divorce. If you or your spouse then decide to remove funds from the 401(k) it is taxable as it normally would be.

It is important for you to understand what assets and property you have to make an informed decision on how to divide property such as a 401(k).