Dividing retirement assets in a New Jersey divorce is a bit more complicated than some expect. Even if you and your spouse want equal shares, some types of retirement assets have taxes and penalties involved. You can sometimes avoid penalties by choosing a different way of distribution.

Consider equitable distribution

If you have multiple retirement assets of equal value, you can take one while your spouse takes the other. Couples who want to equally distribute their assets can consult with a family lawyer about the guidelines for equitable distribution. The division of assets and property can require complex calculations.

Try to avoid liquidating the 401(k)

You have to pay taxes when you liquidate a 401(k), so it’s not a desirable option. You may also receive penalties for liquidating the 401(k), and it can require legal approval. Consider it a last resort if you’re struggling to come to an agreement with your spouse on how to divide the retirement assets. Dividing the 401(k) is the most complicated option for handling your 401(k), so liquidating is probably a better option for you than dividing.

Is rollover an option?

If you’re over the age of 59 1/2 or you have left your employer, then you could roll over your 401(k) into an IRA. This may make the division of the retirement assets easier.

Dividing annuities

Dividing annuities during a divorce may require complex paperwork. You could withdraw through a sell or a surrender transaction. Another option is withdrawing the annuity and creating two new contracts to divide it among you and your spouse.

What part of the IRA is yours?

If you had an IRA before marriage, the money in your IRA before marriage is usually only yours. Money added to the IRA during your marriage is sometimes marital property depending on your state. An inherited IRA, however, is usually the sole property of the individual.

You need more than a divorce decree

Filing a divorce decree isn’t enough to divide certain retirement assets. You need to file a Qualified Domestic Relations Order.

When you and your spouse discuss how to divide your retirement assets, it’s important to consider how taxes may affect the amount and what the best way of distributing the assets is. Equal distribution isn’t always necessary if one partner contributed more to the asset. Seeking professional advice from a family law attorney is a good idea to protect your rights.