Retirement savings can represent decades of work and a significant share of a couple’s wealth. So when a marriage ends, deciding what happens to those accounts can have serious financial consequences. A retirement account may have one spouse’s name on it, but that doesn't necessarily mean that spouse gets to keep all of it after a divorce. Dividing retirement accounts in a divorce isn't always as simple as splitting an account balance in half. Michigan law distinguishes between marital and separate property. Understanding those rules can help you protect your financial interests.
Retirement accounts are treated like any other asset in a Michigan divorce. Under Michigan MCL 552.18, assets are divided equitably. That doesn’t automatically mean equal distribution. Instead, the court aims for a fair and equitable division.
Michigan law defines vested pension, annuity, and retirement benefits attributable to service credit accrued during the marriage as part of the marital estate. Unvested benefits may also be considered. An account that is only in one spouse’s name isn’t automatically considered separate property.
Not all retirement benefits are divided in the same way. The process depends partly on whether the plan has a current account balance or promises future benefits. Common types of retirement accounts that are addressed during divorce include:
Defined-contribution plans generally have an identifiable balance based on contributions and investment performance. A defined-benefit plan, such as a traditional pension, works differently because it promises benefits that may be paid monthly after the employee retires. Government retirement plans can have additional rules that determine what type of domestic relations order is required and how a former spouse's interest is calculated.
These differences can affect both the value of the marital interest and the process used to divide it. The terms of the particular retirement plan should be reviewed before the parties agree on how the asset will be handled.
Dividing retirement accounts in divorce isn’t always straightforward. The accounts don’t always have to be divided 50/50. Spouses can negotiate how retirement asset division fits into the larger property division plan. One spouse might retain a larger retirement account while the other receives other marital assets of comparable value. However, if the parties cannot agree, the court determines an equitable division.
The court may consider several factors when deciding how to divide an account, including:
Most retirement accounts do not allow the beneficiary to withdraw funds without incurring a penalty until age 59 ½. A QDRO allows funds to be withdrawn from a retirement account for purposes of property division without incurring any penalties. A QDRO is a Qualified Domestic Relations Order. It’s a special legal court order that divides certain types of retirement plans that are governed by federal law. It directs the retirement plan administrator to pay a portion of the participant's benefits to the former spouse, known as the alternate payee. Qualifying retirement accounts require a QDRO to actually transfer the award interest.
Some retirements require an Eligible Domestic Relations Order (EDRO) instead of a QDRO. Under Michigan’s EDRO Act, an EDRO is required for certain Michigan governmental, state, or municipal retirement plans. It’s a court-ordered instructional document that authorizes a specific amount of the account to be paid to the ex-spouse. Depending on the divorce terms, it could be a percentage or specific share of the account. A standard Judgment of Divorce alone is not enough to force a public pension plan to split or distribute funds.
The completed EDRO must be formally submitted, signed by a judge, and filed/approved by the Michigan Public Retirement System administrator before the employee's official retirement allowance effective date or death. Without it on file, the pension administrator will disburse 100% of the benefits strictly to the employee.
Pensions are generally treated differently from a 401(k) retirement account. Pensions typically start providing a monthly benefit at the time of retirement. This is slightly different from a 401(k) that has a current account balance. One option is deferred division. The marital property portion of a pension could be divisible when the pension benefits are payable.
Another option is to offset the pension's value with other marital assets. Terms of the divorce judgment and applicable retirement plan rules determine how the former spouse ultimately receives the awarded interest.
Spouses shouldn’t assume that the value of a retirement account is the equivalent of cash in hand. Retirement accounts have different tax liabilities depending on the type of account and what you want to do with it. For example, a direct withdrawal or improper transfer could create tax liability or penalties.
A properly structured QDRO or EDRO could allow the funds to be transferred without being treated as an early withdrawal. That way, penalties are avoided. However, you would still need to pay taxes on the retirement withdrawal.
There are several practical steps that a spouse can take to get ready for dividing retirement accounts in divorce. It can be helpful to work with a Michigan divorce attorney. A lawyer can provide guidance on the best method for addressing retirement accounts during the divorce.
Start by gathering recent statements for every retirement account that each spouse has. Identify each account’s type and when it was opened. If the account was opened before the marriage, track the contributions that were made before and during the marriage. Obtain the plan's governing documents or summary plan description when necessary. Identify whether a QDRO, EDRO, or another domestic relations order is required.
Make sure the divorce judgment clearly addresses the retirement asset. Don't assume the retirement account has been divided simply because the judgment awards a percentage of it.
The problems that arise from not properly dividing retirement accounts during divorce may not make themselves known until years, or even decades, later. A former spouse may discover that the retirement plan never received the court’s divorce order. Their intended interest may have never been properly established. This results in having to backtrack and find documentation to establish an interest.
Documents may be difficult to locate. It may take months to have the documents processed. A spouse could have lost their share of the retirement funds. The ex-spouse might accidentally remain the primary beneficiary on a 401(k) or IRA, overriding the divorce agreement under certain federal laws. There could be unexpected tax liabilities that arise. There may even be legal liability or penalties for the spouse who failed to establish the other spouse’s interest.
Your retirement savings represent years of work, so they deserve careful attention when you're dividing property in a divorce. Michigan law determines which retirement benefits may be part of the marital estate, but the process doesn't end there. How the assets are valued, divided, and transferred can make a significant difference to your financial future. The Law Offices of Kevin R. Lynch P.L.C. can help you understand your rights and address retirement accounts as part of your Michigan divorce. Schedule a consultation today to discuss your divorce and retirement accounts.
© 2026 Law Offices of Kevin R. Lynch P.L.C.
| View Our Disclaimer | Privacy Policy
Law Firm Website Design by The Modern Firm