Divorce & Retirement Accounts Question

[dsp0725]

I formed my business before getting married. I am setup as an LLC taxed as an S corp. I own 100% of the business.

Most of my retirement is in my solo401k which is setup under my business and has annual employer contributions.

I also have a Roth IRA.

My question is... if my wife and I were to get divorced, would she get half of my roth ira only? I've heard that because the business was formed before we were married, she shouldn't have access to the solo401k. We are in Texas.

I appreciate the replies.

 

[pb4uski]

Based on my observations.... she'll likely get 1/2 of the growth all accounts from when you got married to when you get divorced... Roth, solo 401k and any others... plus 1/2 of the increase in the value of the business. And vice versa... you'll get half of her growth.

If she has a good divorce attorney or you have been a bad actor then she might get more.

 

[RockyMtn]

I formed my business before getting married. I am setup as an LLC taxed as an S corp. I own 100% of the business.

Most of my retirement is in my solo401k which is setup under my business and has annual employer contributions.

I also have a Roth IRA.

My question is... if my wife and I were to get divorced, would she get half of my roth ira only? I've heard that because the business was formed before we were married, she shouldn't have access to the solo401k. We are in Texas.

I appreciate the replies.

Not sure that is correct. Whatever was in the account prior to marriage would be yours. Additions and any appreciation that happened after the marriage would be marital assets. At least that's what happened in my divorce.

I kept 100% of the 401k by trading other assets for it. Keep in mind that if you are trading after tax assets for 401k value you need to determine what the after tax value of the 401k is (you haven't paid taxes on 401k yet) or you will come out on the short end.

 

[Bamaman]

Kind of reminds me of that Jerry Reed hit, "She Got The Gold Mine (I Got The Shaft) where they split it down the middle and she got the better half.

 

[aja8888]

One thing to keep in mind: "Community property" does not equal a 50/50 split.

 

[Texas Proud]

This reminds me of a class that I had maybe 35 or so years ago....

You go into a marriage with a cow and bull... that is separate property... after marriage then have a calf... the calf is community property even though it was 'made' from separate property....

 

[HadEnuff]

I formed my business before getting married. I am setup as an LLC taxed as an S corp. I own 100% of the business.

Most of my retirement is in my solo401k which is setup under my business and has annual employer contributions.

I also have a Roth IRA.

My question is... if my wife and I were to get divorced, would she get half of my roth ira only? I've heard that because the business was formed before we were married, she shouldn't have access to the solo401k. We are in Texas.

I appreciate the replies.

if you are even thinking that a divorce may be in the offing, I hope you are seeking the advice of a licensed attorney who handles divorces in your state.

 

[athena53]

I'd like to add, even tough I am NOT a lawyer and my experience is based on a divorce in NJ 20 years ago, that a negotiated property settlement can keep it out of the courts (other than bringing it before a judge for final approval) and give you more leeway. I was able to keep all of the investments in my name, some of which I'd made during the marriage, in return for not getting child support. (My Ex had no assets other than his share of the equity in the house; he'd spent every dime he'd made on nice things for himself and had been unemployed the last 5 years of the marriage.)

The proposed settlement has to be reasonable and signed off by both parties, so the court will look at how your wife will be after this- are there minor children? does she have a career so she can support herself? did she give up a career to hold down the fort at home so you could build the business?

I agree with HadEnuff- talk to a lawyer if you think divorce is a possibility. He/she can tell you how things work in real life in your state.

 

[candrew]

I'm following this thread with interest as my SIL is in the process of dissolving her 25 year marriage. Currently, she and her ne'er-do-well husband are legally separated, their home has been sold and the proceeds from the sale have been split equally.

It should be interesting to see if SIL's soon to be ex will end up with part of her retirement accounts. I'm not aware of how this stuff works. They do live in a community property state. SIL has told other family members that she doesn't need an attorney as her bum of a husband would not try and take her to the cleaners.

 

[Amethyst]

1) Consult an attorney in your state. When it comes to legal matters, I've discovered, we may as well be living in 50 different countries.

2) In the mid-00's, a friend separated from and divorced his wife of 15 years who'd been cheating on him (he hired a PI, who got photos and other proof). They had 2 minor children at the time. Even though he was the wronged party, he had to give her half his TSP balance, which was much bigger than hers, since he was older and a higher grade. (He felt he'd come out OK, though, since after the economy recovered, his remaining 1/2 also recovered to more than he'd started with).

 

[Rianne]

A friend of ours just had her divorce finalized. Turned out nasty DH already put many assets in chirpy name without her knowledge. Alert to spouses, be aware and actively involved in all assets, where they are, who's name they are in and where the money goes at all times. Our friend left all finances up to her DH to take care of. She rarely paid a bill or knew account balances. She lived a privileged life of travel and extravagant things for almost 35 years. The shock of what she is facing now, well you can imagine. I told her to read "Millionaire Next Door" to re evaluate her life and spending.

 

[pb4uski]

What is "chirpy name"? Odd term.

 

[MichaelB]

What is "chirpy name"? Odd term.

Uh, I don't think it was an endearing reference ..

 

[karen1972]

Yes definitely see an attorney. My dads business partner divorced and he was able to exclude his LLC that he formed prior to their marriage but not the business from the family trust fund.

I also know they ended up changing the settlement after several appeals and reinterpretation of the laws defining marital property (as I saw part of his divorce is shown in case law studies).

He didn't have a 401k but there was a lot of discussion over whether the art purchased from business earnings and placed in the family home office was "marital" or not.

 

[Rianne]

What is "chirpy name"? Odd term.

Chirpy is the gal on the side who managed to get my friend's husband to buy property and such in her name. I think she's from Romania.

 

[RenoJay]

I got divorced three years ago and have been consulted recently on three other couples’ divorces. In each case the final agreement was negotiated (not court ordered) and more or less coincided with most people’s’ implicit view of “fair.” That said keep your head in the game. Divorce is possibly the most expensive thing a person ever does, and it’s easy to get emotionally side tracked by ex’s manipulation, hourly lawyers promising impossibly good settlements, guilt, desire for freedom, etc. my suggestion is to try to sit down cordially with soon to be ex, lay out the assets, and ask, “what do you think is fair.” If the answer is anywhere in the ballpark of what you think is fair, try to just get it done before the lawyers get into your ex’s head.

 

[Chuckanut]

my suggestion is to try to sit down cordially with soon to be ex, lay out the assets, and ask, “what do you think is fair.” If the answer is anywhere in the ballpark of what you think is fair, try to just get it done before the lawyers get into your ex’s head.

Agreed. As far as possible keep the 'black robes' away from a divorce settlement.

 

[Carpediem]

my suggestion is to try to sit down cordially with soon to be ex, lay out the assets, and ask, “what do you think is fair.” If the answer is anywhere in the ballpark of what you think is fair, try to just get it done before the lawyers get into your ex’s head.

+1000!

Of course, this approach requires that the soon to be ex has a rational mind and isn't intent on making you "lose/suffer" no matter what it takes. Unfortunately, that was the mindset my ex had so the lawyers all got to add to their retirement funds.

 

[mtheulen]

ink just dried on mine in august
everything owned/earned prior to marriage stayed that way.Everything owned/earned during marriage was split 50/50
Represented myself, however i had legal counsel guiding me on the sidelines.
As stated every state is different
Every spouse is different
At least consult counsel

 

[RenoJay]

ink just dried on mine in august

everything owned/earned prior to marriage stayed that way.Everything owned/earned during marriage was split 50/50

Represented myself, however i had legal counsel guiding me on the sidelines.

As stated every state is different

Every spouse is different

At least consult counsel

Congrats on getting to the other side. Regarding everything earned prior to marriage, did you keep all the earnings, dividends, interest, rent etc on those assets even if the earnings came during the marriage?

 

[splitwdw]

What is "chirpy name"? Odd term.

Think she means "chippy" which is old time slang for slut or prostitute. My grand father has used that term.

 

[mtheulen]

I Did. We split the house 50/50.I did offer 50% of my second pension.IRA, pension,stocks, bonds held prior to marriage i kept along with all appreciation

 

[Danmar]

I got divorced three years ago and have been consulted recently on three other couples’ divorces. In each case the final agreement was negotiated (not court ordered) and more or less coincided with most people’s’ implicit view of “fair.” That said keep your head in the game. Divorce is possibly the most expensive thing a person ever does, and it’s easy to get emotionally side tracked by ex’s manipulation, hourly lawyers promising impossibly good settlements, guilt, desire for freedom, etc. my suggestion is to try to sit down cordially with soon to be ex, lay out the assets, and ask, “what do you think is fair.” If the answer is anywhere in the ballpark of what you think is fair, try to just get it done before the lawyers get into your ex’s head.

Yes agree. I went through “the divorce from hell”. My advice would be to be generous, not tricky or devious, straightforward and honest. If you have to pay do it in full and on time. Try to keep your emotions out of it but this will be very difficult. If kids are involved your primary goal should be to maintain a loving relationship with them.

My divorce was the most difficult thing I have ever done. Happily it worked ou5 very well in the end. But it took 15 years.

 

[mtheulen]

Yes agree. I went through “the divorce from hell”. My advice would be to be generous, not tricky or devious, straightforward and honest. If you have to pay do it in full and on time. Try to keep your emotions out of it but this will be very difficult. If kids are involved your primary goal should be to maintain a loving relationship with them.

My divorce was the most difficult thing I have ever done. Happily it worked ou5 very well in the end. But it took 15 years.

Did the same.Decided from day one to take the high road, no funny business.In the end, it was a good decision