When couples get divorced, they are often concerned about who gets to keep certain assets. Typically, significant assets, such as the marital home and those held in bank accounts, are top-of-mind. However, retirement accounts can be just as important, particularly because they typically represent years of savings. Continue reading and reach out to the seasoned Providence divorce lawyers here at Caprio Law to learn more about how 401(k)s and retirement accounts are typically divided in Rhode Island divorce and how our legal team can help protect your hard-earned assets, every step of the way. Here are some of the questions you may have:

Are 401(k)s and Retirement Accounts Considered Marital Property?

Generally speaking, Rhode Island courts will consider the portion of a retirement account that was accumulated during the marriage to be marital property. This means that even if only one spouse’s name is on the account, the funds inside may still be subject to division during the divorce process. Some of the most commonly divided retirement assets are as follows:

  • 401(k) plans
  • Traditional IRAs
  • Roth IRAs
  • Pensions
  • Deferred compensation plans
  • Government employee retirement benefits
  • Military retirement benefits

That being said, not every dollar inside a retirement account is automatically divided between spouses. For example, if one spouse opened a retirement account years before the marriage and continued contributing to it afterward, the court may determine that a portion of those funds should remain separate property. Generally, the courts will look at several factors when determining what portion of an account is marital and what portion is separate, including:

  • When the account was opened
  • Whether contributions were made before the marriage
  • Whether contributions were made during the marriage
  • Whether separate and marital funds were mixed together
  • The amount of appreciation or growth that occurred during the marriage

How Does a Rhode Island Court Divide Retirement Accounts?

Rhode Island follows what is known as the equitable distribution process. Simply put, equitable distribution does not necessarily mean that marital assets are divided equally. Instead, it means the court will divide assets in a way it believes is fair under the circumstances.

When determining how retirement accounts should be divided, Rhode Island courts may consider factors such as:

  • The duration of the marriage
  • Each spouse’s income and earning capacity
  • The age and health of each spouse
  • Contributions made during the marriage
  • Each party’s future financial circumstances
  • Child custody responsibilities
  • The value of other marital assets and debts

In many cases, retirement accounts are divided through a legal document known as a Qualified Domestic Relations Order, more commonly referred to as a QDRO. Essentially, a QDRO allows retirement funds to be transferred from one spouse to another without triggering certain tax penalties or early withdrawal consequences that would otherwise apply.

Without a properly drafted QDRO, significant financial problems can arise. In some cases, individuals unintentionally expose themselves to unnecessary taxes or penalties simply because the retirement account transfer was not handled correctly.

If you have further questions about how these accounts are divided in a divorce, our legal team is here to help. Contact Caprio Law today so we can assess the circumstances of your situation and work toward the best outcome possible on your behalf.