Retirement accounts are not just financial resources. They are a source of personal stability and may help people feel more comfortable with the idea of leaving the workforce as they age. It can take years of savings to set aside sufficient capital to maintain a baseline standard of living after retirement.
Married couples in North Carolina may contribute to a retirement savings account for the entirety of their unions. Either spouse could also potentially have a retirement savings account that they began funding long before they ever got married, as it generally takes decades to put enough aside to retire with confidence. Is it possible to treat those retirement savings accounts as separate property that will not need to be divided when a couple divorces?
Only some assets are separate property
The average adult in North Carolina may find the idea of separate and marital property relatively confusing. It is common for people to misunderstand what is marital property and what is technically the separate property of either spouse. People often have an overly simplistic idea about marital and separate property and may wrongfully assume that any asset held solely in the name of one spouse is separate property. However, that is not how North Carolina family courts look at marital assets.
What matters is when someone acquired certain property and what, if any, contracts between the spouses may apply to the situation. Some people designate retirement savings and other pre-existing assets as separate property in a prenuptial agreement. Those who do not have a contract with their spouse can expect that the assets and income they obtained during the marriage will be subject to division when they divorce.
A retirement savings account held solely in the name of one spouse and only contributed to by that one spouse would still be subject to division in a divorce. The courts will either order the actual division of the account or may simply consider the value of the portion that is part of the marital estate when dividing other assets.
Regardless of the exact approach to property division that a couple takes during divorce, spouses can anticipate that at least a portion of their retirement savings will likely be treated as part of the marital estate. Determining which assets are vulnerable to division is an important step to take when preparing for property division negotiations or litigation as doing so will allow individuals to make informed decisions about their approach to the divorce process itself.