Divorce Allocation of Assets Question - What Is Fair

Updated on July 12, 2013
E.T. asks from Albuquerque, NM
19 answers

I'll try to keep this brief. Five years ago my husband and I needed to move for his job. I was not in favor of the move (liked where we were living) but it needed to happen or else he would lose his job. In order to pay off our current house, we took a loan from my retirement account - expecting to pay it back within three years. Well, I had to leave that job (they required me to move to the other side of the country so we took a small buyout offer and I left). So, we had to pay back the loan within two months. We couldn't come up with the $30,000 that was required so we paid the IRS penalty and my retirement account is $30,000 lower than it was.

Now we're getting divorced. I'd like my soon to be ex to contribute $15,000 to my retirement to make up what I think is his half of the loan we didn't pay back. He has a retirement account as well and we didn't take from his because mine had better pay back options. But - in the end, I'm out $30,000 and his retirement account wasn't impacted. If we weren't getting divorced it wouldn't matter because it was all our money together anyway.

He thinks I'm being unreasonable - that this is just one of the many financial decisions we made together during our marriage and we shouldn't go back and say he owes me for that, or I owe him for other things (although he can't think of anything where I would owe him). He owns a fairly successful business and I had already said I would sign away my interest in it... but I assumed that he would contribute to my retirement. In my mind I was sort of giving up any claim to his business and asking for only what I thought was fair. He doesn't have money from his business to give me anyway, so either way, he'd have to pay me over time.

So - honest opinions. Am I being unreasonable? Or should I hold my course on this?

Edited to add: I do appreciate the advice to talk to a lawyer, but what I'm really interested in is real people's opinions. What seems fair to you (not what would a court do).

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answers from Anchorage on

I think he owes you the $15000. But I have questions about his business, did he build it all on his own with only his money or was family money used to start/build it up? If so you have a right to a % of the business or a buyout amount. I would definitely talk to a lawyer. If you just feel like being nice and letting him have all of the business do not sign anything until you have $15000 cash in hand. JMO.

2 moms found this helpful


answers from Los Angeles on

Unless he's giving you a portion of his retirement account, then I agree he should pay half the amount you're out. You are being completely reasonable. You can bet he'd be asking for you to pay him if the money had come from his retirement account.

1 mom found this helpful

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answers from Washington DC on

It's going to depend on the divorce laws in your state. In most community property states, though, the money in BOTH accounts that was earned and contributed (or deducted) during your marriage belongs to both of you.

When relationships don't work out, you don't get a refund on all the money (or time, or emotion, etc.) you put into it. You took the $30K together, avoided paying it back together, you paid the IRS together... he doesn't now have to pay it back unilaterally because NOW you want it repaid. Regardless of which name was on the account, his half of what you deducted together was HIS half to deduct. Income earned during a marriage is community property. The fact that you contributed it to a retirement account doesn't change that.

That being said, half of the money contributed to "his" retirement account is also YOURS.

When you divide assets and liabilities, you can't really discuss the missing 30K because that isn't an outstanding debt (you already paid the penalty, right, you don't HAVE to pay it back anymore), but you SHOULD include the current balances in BOTH retirement accounts (minus anything that was there before you were married). Don't focus so much on him paying you back for specific things, or about going 50/50 on each line item, but the end sum needs to be the SAME for both of you. If there's $90K in his account and $50K in yours... he doesn't owe you the $15K because you borrowed $30K... but he owes you $20K so that you both end up with $70K... or you could keep the house and short him $20K when you buy him out... or he keep an extra $20K in debt so that it all comes out in the wash.

Hope this helps.


12 moms found this helpful


answers from Boston on

I agree with you 100%. My husband and I are in a similar situation, only I took a $40K hit to my retirement account. In theory, that $40K is sitting in our home equity, except we don't have any equity. One of our recent refi options was for us to put the house in my name only because he is self-employed and his income verification is a nightmare and I can qualify on just my income anyway. We agreed in theory that if we ever were to split and I were to keep the house, if we ever got to a point where the house were worth more than what we owe plus his half of the $40K, I would buy him out of a percentage of the remaining equity.

At the end of the day, depending on your state guidelines and things like when your accounts were funded and what you each contributed, you may end up splitting some of your retirement assets anyway. In theory, anything each of you contributed before you were married plus the earnings on that balance is separate. And anything contributed while you were married plus the earning on that is joint. So if his marital contributions plus earnings is $100K and yours is $50K, you should each end up with $75K. If you hadn't taken a $30K hit, you would have been splitting $180K and have had $90K each, so in the end, you will have each split that loss ($15K each). Where it will get tricky for you is if part of that $30K was from your pre-marital balance and in that case, I do think he should pay that back to you over and above whatever gets considered when you balance out the marital contributions.

The payment process is called a QDRO (Qualified Domestic Relations Order). Once a judge sorts out who should owe what, they will send an order to the retirement plan administrator to figure out how much should be sold and transferred to the other person's account. So using our hypothetical figure where you each end up with $75K, the retirement plan administrator will figure out any additional earnings or losses that have to be considered and will then complete the transaction.

Hope that helps! I work in the retirement administration business and we process QDROs all the time so making the accounts equitable is very common.

4 moms found this helpful


answers from St. Louis on

You paid the the penalty out of your marital assets so martial assets were adjusted 50/50. He is entitled to 50% of your 401k and you are entitled to 50% of his.

So, if your 401k is 30,000 or more than his, STFU! You will lose money complaining.

What you pretty much need to do is figure out what marital assets you have are. 401Ks, equity in home, savings. Then marital debt, mortgage, credit cards. Add them up, subtract, and divide what is left in half. If that is more than the balance of your 401k know you have to hand that over to him. If it is less than your 401k expect that to go to you.
I think what the other answers are missing is that if you saved more of your income into your retirement, he doesn't owe you a penny in that regard. What I mean is if you saved 300,000 in your 401K and he only saved 200,000 and that was your only marital assets you still owe him 50,000. The loan is irrelevant, the only relevant number is your balance, his balance, all other assets....

Not that we will ever divorce but I put 10% in my 401k as does my husband but he makes 20,000 a year more than me so if we were to divorce he would owe me 1,000 per year, half the difference.
Okay just feel I need to add it is just a balance sheet. What is important now is not balancing it but discovery. You need to know what is or is not marital debt and assets. Him hiding money in his business or forcing business debt into marital assets is going to hurt you more than 15,000 in a 401k that had a balancing effect in another marital asset, your home. Just because you are an accountant doesn't mean it doesn't exist.

Here is the thing and this is very important! If he has a good lawyer his lawyer is telling him let her chew on that bone, don't give her an answer, hoping you don't look at the big picture. Put down that bone and find out what is behind the dog house!

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answers from Philadelphia on

Based off what you told us, I think your ex should reimburse you and give you $15,000. If you had borrowed the money from a bank he would certainly be responsible to pay it back.

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answers from Los Angeles on

Yeah, I think he owes you the $15000 for sure. And half of the IRS penalty if you still owe that. You were both living in the home.

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answers from Eugene on

My ex and I split our retirement accounts. I got half of his and he got half of mine so it all evened out. He got to keep his business assets and accounts. Turns out he was hiding joint funds in the business account. So at the end of the year, he closed the account and, surprise, turns out my name was on the account. He got to keep the money per the divorce agreement, but I had to pay half the taxes. So be careful.

I'm not sure why you think you are being unreasonable. Why not just split everything down the middle? Or give and take so you each have about half of the assets?

It's not possible to be completely fair. But you are in the negotiation phase so negotiate. Don't let you husband dictate to you what you should or shouldn't get. Think about it, ask for what you want and keep in mind the goal is not to win but to work through this process so you can both move on.

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answers from Pittsburgh on

I would think all assets acquired during the marriage (including a fair assessment of the value of his business) would be split 50:50. I don't know what the laws are where you live, but that is what you need to find out.

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answers from Washington DC on

i think you are being very fair. if you're going to sign away your interest in his business, he needs to reimburse your retirement account. it's not like you're asking him to replace the whole shebang.
stick to your guns.

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answers from Los Angeles on

My answer is based on my limited knowledge of how divorces "really work" and only the information you've provided. I would say that what you're suggesting is fair; that he pay you half of your retirement deficit.

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answers from Oklahoma City on

I would think this was a fair option. It does make sense. I also would not have signed away any part of his business, that's part yours because it was something I am sure you both worked together planning and making it successful.

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answers from Salinas on

I think you are being totally fair. Yes, it was a financial decision you made together in your marriage, but in the end it really only impacts YOU. How does he not see that?

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answers from Milwaukee on

Welll, in a divorce, things are usually divided between the two parties. Sometimes 50/50, sometimes not (depending on circumstances & lawyers).

If you have acquired assets as a married couple, chances are you did so as decisions made together in the marriage, & therefore they will be split up b/t the two of you.

The same is true of the liabilities. The only times I've heard of liabilities not being split up somewhat equitably between couples are things such as student loans that someone brought into a short-lived marriage, & self-owned business liabilities, which went with the person who retained the business.

So based on that logic, yes, he should bring your retirement account back up to the level it would have been. Personally, I would expect him to pay the full 30K, as he is retaining a business investment, as well as his own retirement account.

Hope you are able to work things out amicably, & without detriment to your future. T.

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answers from Boston on

Talk to a lawyer. If you both can agree on a mediator, that's much cheaper than 2 attorneys. You make an agreement, the mediator submits it to the court, and the judge signs off on it. This keeps court costs way down too. I would think your marital obligations would be joint - so paying back the retirement account would be a shared obligation. Your asset is reduced by $30K because of the joint marital decision made at the time. I can't believe it wouldn't be taken into account in some way when the assets are divided. Same thing if you still had an outstanding IRS penalty, which you both paid. So your only recourse is to reconsider signing over your interest in his business, unless a good financial planner or the mediator can come up with another scenario. Get good advice and don't be bullied into anything by your husband. I think you need to stop discussing this with him and get an objective opinion on this and everything else you've agreed to in principle. It's all negotiable until it's sign. Never assume, of course. Get it all on paper.

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answers from Los Angeles on

I think what you are asking is reasonable and fair.

You are the one that is out the $30K that benefitted you both, while he & his tetirement fund gets to stay whole? Nope, that is not fair of him to think he should not have to pitch in on half of that 'debt'.

Just my opinion. Stay the course.

And for what it's worth: I wouldn't relinquish my rights to his business, just because it isn't making & now doesn't mean it won't in the next 6 months, right? You can relinquish your stake in it at any time, for now I would look at that as if it was your only card to play, so to speak. Although I commend you for being very fair, it's refreshing to hear!

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answers from San Francisco on

My understanding is that you have a paid off house? Sell the house, split the proceeds, and he owes you $15,000 for his share of the dip into your retirement.

Yes, I think it's fair that he reimburse 15K to your retirement. Unless I am misunderstanding the situation, I don't see how it would be fair otherwise.

1 mom found this helpful


answers from Phoenix on

yes, he owes you 15k more than you owe him. don't try to be nice and "give up any claim" to anything. I was "nice" to my ex and he took advantage of me. couldn't pay his child support but sure had money to wine and dine his new girlfriends. once everything is agreed on, it's hard to change it. Good luck.

1 mom found this helpful


answers from Dallas on

He owes you 15,000. It's not unreasonable. I doubt he could come up with enough day to day expenditures to make that kind of hit to your retirement acct.

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