Divorce in Alabama & Spousal Right to Half of 401(k)
State laws govern the divorce process, and most states follow the equitable distribution doctrine of divorce property division. Before an Alabama Circuit Court will grant your final divorce decree, you must enter into a written settlement agreement with your former spouse dividing your property and debts or request a division by the Circuit Court. Marital property includes any 401k assets, which are subject to equal division.
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Overview
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To obtain a divorce in Alabama, you or your spouse must be an Alabama resident for at least six months, you must live separately and apart for more than one year or file a divorce on fault-based grounds. Fault-based grounds include abuse, imprisonment, deviant sexual behavior, substance abuse, mental illness, adultery and sexual incompatibility. Alabama courts will encourage divorcing spouses to settle their differences outside of court, but judges will help them apportion their property and debts if they are unable to agree. Judges divide property according to Section 30-4 of the Alabama Code.
Alabama Equitable Distribution Laws
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Alabama is an equitable distribution state, and marital assets and debts are subject to equitable division between spouses. However, separate property is not subject to equitable distribution. Separate property remains the property of one spouse as long as a spouse did not commingle it with marital property. Separate property includes inheritances devised to only one spouse, premarital investments that were not commingled with marital property and premarital property. Furthermore, separate property also includes post-separation investments and property acquisitions.
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Retirement Accounts
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Retirement and pension accounts can be marital property, separate property or part-marital and part-separate property. Any 401k accounts established before marriage may become marital property if both spouses contributed to their accounts using marital funds. However, 401k accounts established before marriage can remain separate property if a spouse did not continue contributing to the account after marriage.
Permutations/Examples
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For example, if Jane established her 401k account before marriage, and she stopped contributing to her account on the date she married Jim, she would be entitled to all of her 401k assets upon divorce. However, if Jane established her 401k account before marriage, and she continued contributing to it after marriage using marital funds, Jim would be entitled to half of her account from the date they married. If Jane's 401k was valued at $10,000 on the date of marriage and $100,000 on the date of separation, then under Alabama law, $90,000 of Jane's 401k account would be subject to equitable distribution between Jane and Jim. If Jane used only inheritance funds to contribute to her 401k, her account could remain separate property not subject to equitable distribution.
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