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How is 401k divided in a SC divorce?

Marital property is subject to equitable division, while nonmarital property is not. What about your retirement plan that you have paid into from your paycheck for the last 5, 10, or 20 years? Is your 401k plan subject to equitable division as well?

It most likely is, although a portion of your 401k may be considered nonmarital property that is not subject to division. Below, I’ll discuss how a 401k plan is divided in a SC divorce case, including what happens when a portion of your 401k is considered nonmarital property.


All property that is acquired during the marriage, with few exceptions, is considered marital property and is subject to equitable division – that includes investments, profits earned on investments, and retirement accounts including your 401k.

Apportionment of Marital Property

When dividing marital property, whether it is your 401k plan, the house, or the bank accounts, the Court must consider the “apportionment factors” that are found in SC Code Section 20-3-620, including:

(1) the duration of the marriage together with the ages of the parties at the time of the marriage and at the time of the divorce or separate maintenance or other marital action between the parties;

(2) marital misconduct or fault of either or both parties, whether or not used as a basis for a divorce as such, if the misconduct affects or has affected the economic circumstances of the parties, or contributed to the breakup of the marriage; provided, that no evidence of personal conduct which would otherwise be relevant and material for purposes of this subsection shall be considered with regard to this subsection if such conduct shall have taken place subsequent to the happening of the earliest of:

(a) entry of a pendente lite order in a divorce or separate maintenance action;

(b) formal signing of a written property or marital settlement agreement; or

(c) entry of a permanent order of separate maintenance and support or of a permanent order approving a property or marital settlement agreement between the parties;

(3) the value of the marital property, whether the property be within or without the State. The contribution of each spouse to the acquisition, preservation, depreciation, or appreciation in value of the marital property, including the contribution of the spouse as homemaker; provided, that the court shall consider the quality of the contribution as well as its factual existence;

(4) the income of each spouse, the earning potential of each spouse, and the opportunity for future acquisition of capital assets;

(5) the health, both physical and emotional, of each spouse;

(6) the need of each spouse or either spouse for additional training or education in order to achieve that spouses’s income potential;

(7) the nonmarital property of each spouse;

(8) the existence or nonexistence of vested retirement benefits for each or either spouse;

(9) whether separate maintenance or alimony has been awarded;

(10) the desirability of awarding the family home as part of equitable distribution or the right to live therein for reasonable periods to the spouse having custody of any children;

(11) the tax consequences to each or either party as a result of any particular form of equitable apportionment;

(12) the existence and extent of any support obligations, from a prior marriage or for any other reason or reasons, of either party;

(13) liens and any other encumbrances upon the marital property, which themselves must be equitably divided, or upon the separate property of either of the parties, and any other existing debts incurred by the parties or either of them during the course of the marriage;

(14) child custody arrangements and obligations at the time of the entry of the order; and

(15) such other relevant factors as the trial court shall expressly enumerate in its order.

But what is the value of your 401k plan? Is it equal to the dollar value of other types of property? Should it be discounted?

Is the Dollar Value of Your 401k Equal to Other Types of Property?

When dividing the marital property, the Court should consider the actual value of a 401k plan and not just the dollar amount – the 401k plan may be worth as little as half of its face value.

Why should 401k plans be discounted?

First, if you withdraw funds before age 59 ½, you must pay a 10% tax penalty. Second, when you withdraw the funds, you must also pay state and federal income tax on the withdrawal. 401k plans are intended for retirement, and you will pay substantial penalties if you withdraw the funds early.


Any property acquired before marriage will most likely be considered nonmarital property that is not subject to equitable distribution – this applies to 401k plans as well.

How do you separate the marital and nonmarital funds in a 401k account? There are several methods, depending on the size of the 401k and whether it justifies paying an accountant to calculate the exact amounts including rates of growth.

For small accounts, you can simply determine how much money was in the account at the time of marriage and subtract that from the total amount. On the other hand, if the 401k is a reasonable size, you will want to account for the rate of growth and the funds that were generated by your original, nonmarital funds…

You could estimate the rate of growth for the entire account, apply that rate of growth to the nonmarital funds, and then subtract that amount from the total. Or, the most accurate (and involved) method is to determine the rate of growth for each individual holding and apply that rate of growth to the nonmarital portion of each individual holding.

Once the portion of the account that is marital property has been determined and divided, a Qualified Domestic Relations Order can be forwarded to the 401k plan directing them to distribute the funds accordingly.

What is a Qualified Domestic Relations Order (QDRO)?

A Qualified Domestic Relations Order, or QDRO, is an Order that must be prepared and sent to the 401k plan that tells them the exact amount of funds that is to be transferred. The QDRO allows you to avoid taxes and penalties at the time of the transfer and it should direct the 401k plan to divide the accounts and subaccounts on a pro-rata basis so that each party retains their portion of each of the holdings within the account.


Your divorce lawyer on the Axelrod team will help you to determine what is marital and non-marital property, negotiate with your spouse whenever possible, and fight for your property and financial security when an agreement cannot be reached.

Call Axelrod and Associates now at 843-353-3449 or send us a message through our website to find out how we can help.

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