How to Divide a 401(k) in a Divorce Settlement

The division of marital assets can be one of the most complex aspects of divorce proceedings. Add complex assets to the mix, and you can get a somewhat convoluted process unless you have an experienced divorce lawyer representing you.

For instance, 401(k)s are commonly held by spouses and are subject to the rules surrounding the division of marital assets. But their division in a divorce proceeding can be complex due to the nature of the type of asset that it is. If you are wondering how to divide a 401(k) in a divorce settlement, your best bet is to contact a divorce attorney for guidance.

Asset Exchange Approach

One method of dealing with a 401(k) in a divorce is by exchanging it for other assets. For example, if your 401(k) is worth $100,000, it may be worthwhile considering exchanging it for marital assets whose total approximates the value of the 401(k). Outright exchanges such as this are among the simplest ways of handling 401(k)s and other retirement accounts.

401(k) Split

Instead of exchanging your 401(k), you may want to consider splitting it with your spouse. This option is a bit more complicated and in most cases, requires the services of an experienced attorney to help with the details and ramifications. Additionally, you will need a court order to perform a 401(k) split.

Partial or Total Liquidation

Another option is the partial or total liquidation of your account, followed by a cash payment to the other spouse. This method is much easier than splitting a 401(k). However, it may come with significant tax ramifications that your attorney and accountant can explain to you.


Transferring a portion or all of your 401(k) to your spouse’s retirement account is an option as well. Since there are typically no tax consequences for rolling a 401(k) over, this is a popular option for spouses.

Keep the 401(k) Intact

Keeping your 401(k) intact is another option that many soon-to-be-divorced couples choose simply because of how complex other options can be. They would rather divide more easily divisible assets and with the help of their divorce attorneys, typically have no real problems finding suitable resolutions to their divorces.

The Takeaway

When it comes to 401(k)s and division of assets in a divorce, know that you have options. However, before making any decisions about your 401(k) or any other retirement account or asset, it is important to know that each option you choose can come with significant tax and financial consequences that you should be aware of. Hence, decisions you make should not be made lightly and without at least a cursory understanding of what is transpiring.

If you have been wondering how to divide a 401(k) in a divorce settlement, contact The Florida Probate & Family Law Firm for help and guidance today. We will identify your most favorable options according to your circumstances and help you understand each choice’s consequences.