Q: My husband and I were married in May 2008 and I filed for divorce a month and a half ago. My 401(k) was set up long before our marriage, with my mother and son listed as beneficiaries. I never changed this. We live in Indiana. Is he entitled to half of the gains or contributions, or anything, since he was never listed as a beneficiary? -- FD via email
A: He is entitled to claim a share of the 401(k); but since you were only married for four years, his share is very unlikely to be 50%.
A marriage is an economic partnership. Generally speaking, assets acquired during your marriage are considered marital assets no matter whose name they are in. There are some exceptions to that rule. In most states, for example, if you inherited an asset during your marriage and you kept it segregated from your other accounts, it would be your sole property. An asset that you owned before your marriage and kept segregated from your marital assets would also be considered your sole property.
But all the money you've earned during your marriage is a marital asset and so are your 401(k) contributions and 401(k) earnings during that time. The same is true of your husband's earnings and retirement accounts.
In a community-property state, marital assets are split 50/50 in a divorce. But Indiana is an equitable distribution state, which means that marital assets are divided 'equitably'. Equitably means fairly. In a marriage that lasted 20 years or longer, a 50/50 split is usually considered fair; but in a short-lived marriage, the division would be ... more equitable. (Who decides what's fair? The divorce court.).
Your 401(k) beneficiary designations are irrelevant to how the account is divided in a divorce. But you should know that the federal law that governs 401(k) plans says your spouse is entitled to be your beneficiary unless he or she signs a waiver of that right. So unless your husband signed such a waiver, he is your 401(k) beneficiary by federal law, regardless of the fact that you didn't change your beneficiary designations.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
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