Retirement accounts are often one of the largest assets in a marriage, and their division can become a contentious issue during divorce proceedings.
Michigan considers various factors when dividing assets, including retirement funds, even when both spouses are employed and maintain individual retirement accounts (IRAs).
Marital property division in Michigan
The Great Lakes State is an equitable distribution state, meaning that marital assets are divided fairly and equitably in a divorce, but not equally. Equitable distribution considers several factors to determine what’s fair, including:
- The duration of the marriage
- Each spouse’s financial contribution
- The standard of living established during the marriage
- Each spouse’s earning potential
Importantly, state law views retirement accounts, including 401(k)s, pensions and IRAs, as subject to division if they are considered marital property. In cases where both spouses are employed and have their own retirement accounts, contributions made before the marriage often remain separate property. On the other hand, contributions made during the marriage are likely to be subject to division.
Division of retirement accounts: How courts approach it
When both spouses have their own retirement accounts, state courts often consider the value of each account and determine an equitable division. Even though each spouse may have separate accounts, the contributions made during the marriage create a shared financial interest in each account’s growth. This shared interest means that retirement assets can still be divided to help ensure fairness.
Longer marriages may lead to a more comprehensive division of retirement assets, as both parties are assumed to have contributed to the household and financial growth over time. Additionally, suppose one spouse has significantly higher earnings or is closer to retirement; the court may consider these factors when determining a fair split.
For instance, if each spouse has an IRA they have contributed to throughout the marriage, the court will evaluate both accounts’ values. Suppose one spouse’s account has substantially more due to higher contributions or better market performance. In that case, the court might compensate by awarding a greater share of other marital assets to the other spouse or by equalizing the values of retirement accounts.
Retirement accounts, even when held separately, are often subject to division in the Great Lakes State if contributions were made during the marriage at issue. Couples contemplating divorce can benefit from enlisting legal support to help ensure they receive a fair share of their marital assets, including such accounts.
