If you find yourself in the midst of a later-in-life divorce in Michigan, the fate of your retirement accounts is a concern. After all, you spent your entire life building this nest egg to live on when you retire, and the idea that these funds could disappear overnight is scary. In practice, the reality may not be as scary as you imagine.
Retirement accounts and marital property
Michigan law classifies all retirement accounts acquired or contributed to during the marriage as marital property. As such, these assets are subject to equitable distribution. This does not mean that you will instantly lose 50% of your account in the divorce though. The family law judge will decide what they believe is fair and just, unless you have a divorce settlement agreement or a pre- or postnuptial agreement.
To determine what is fair and just, the judge will look at you, your spouse and your marriage holistically. This includes how long you and your spouse were married, what you each contributed, what you each need and any other pertinent information and circumstances.
Only the marital portion is divided
The court will only divide the marital portion of you and your soon-to-be ex-spouse’s retirement accounts. This is the portion that accrued or earned during your marriage. Anything predating the marriage or post-separation is considered separate property and remains untouched.
For example, if you have a 401(k) with $500,000 at divorce, but you had it prior to divorce, only that portion of the account that accumulated during the marriage would be subject to equitable division. Accordingly, if you already had $50,000 in the account when you were married, then that amount would not be subject to division.