New Jersey is on par with most other equitable distribution states when it comes to retirement plans and divorce. Some of your account is probably distributable, and it may or may not be a 50-50 division. New Jersey courts take several factors into consideration when dividing such property, not the least of which is whether your spouse has been a stay-at-home parent and can conceivably amass savings of her own before retirement.
New Jersey law isolates a portion of your IRA from distribution in divorce if you earned it before you got married. This is your separate property, but you'll have the burden of proof to convince a judge of that and to clearly identify the part of the account that's yours. Growth attributed to that portion is your separate property as well. Technically, your separate portion of the account is "commingled" or joined with marital assets – the portion earned during your marriage – and this would normally taint an asset, transforming it into marital property. However, New Jersey courts have held that this is not the case with retirement plans such as IRAs.
The marital portion of your IRA is that which was earned or accumulated during your marriage. All states have some sort of cutoff point beyond which acquired assets are no longer subject to division in a divorce. In New Jersey, this point is the date when either you or your spouse filed a complaint for divorce. Your spouse is only entitled to a share of the portion of your IRA that accumulated between the date of your marriage and the date of your complaint.
Because New Jersey is an equitable distribution state, your spouse may or may not be entitled to 50 percent of the marital portion of your IRA. As a practical matter, the state usually divides retirement plans 50-50, but this isn't always the case. An equal division usually occurs if you and your spouse both have jobs that pay about the same, or because you're paying alimony or a division of other marital property has left you both in similar financial circumstances. After a long-term marriage, however, the court might stray from this general rule. If your spouse was never employed and is facing a bleak retirement funded only by Social Security, she's more likely to receive at least half your IRA, if not more. This is particularly true if you have a lot of premarital assets or accounts that can help you fund your own retirement. New Jersey also gives weight to your spouse's contributions to your career – as far as the court is concerned, you didn't earn and accumulate that IRA all by yourself while your spouse stayed home and cared for the family.
Under federal law, IRAs do not require a qualified domestic relations order for division in a divorce. Provided the distribution is made after your divorce and pursuant to your judgment, you won't incur any taxes or penalties on the transfer to your spouse – but you must make it within a year of the date of your divorce. You can roll your spouse's portion of your IRA into a similar account in her own name. After this is accomplished, what she does with the account becomes her own tax burden.
Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance and w, bankruptcy, and she writes as the tax expert for The Balance.