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Divorce Spotlight: Spouses Can Use 401K Assets to Pay Reasonable Legal Expenses

Author: Mosson Law, LLC | | Categories: Attorney , Divorce Attorney , Family Law , Family Law Attorney , Legal Consultation

When married spouses are separating, they very often experience not just additional expenses of separate households, but the expense of needing to obtain legal advice and/or legal representation.

In Allison v. Allison, the Court of Special Appeals held that a spouse facing legal expenses can use their 401K account to pay for "reasonable attorney's fees" without being accused of stealing marital funds during the divorce proceeding, and before splitting the marital share as part of the divorce.  160 Md. App. 331, 864 A.2d 191 (2004).

Importantly, a court can scrutinize the amount taken out to ensure it has been "reasonable" and not an attempt to dissipate the other spouse's assets, before divorce requires sharing it.  Allison, 160 Md. App. 338-40.

Spouses with assets earned during the marriage, and homes and other significant property purchased during the marriage, should obtain legal advice about what must be shared and what does not need to be divided during divorce.

Spouses who simply take, hide, transfer elsewhere, or waste marital properties and marital funds can face Court judgments against them for the value lost, as part of the divorce process, which then, they must pay to their ex-spouse.  See, e.g., Allison, 160 Md. App. at 136-140; Magness v. Magness, 79 Md. App. 668, 675 (1989) (holding that a court handling a divorce civil action has the equitable power to protect property rights, personal rights, and issue injunctions).

While Maryland is an equitable property state that does not simply require the division of all assets during divorce under a strict "50% / 50% split," Maryland generally considers income and retirement assets accrued earned during the marriage to be likely marital assets to be split.

What is a "marital share" of one spouse's pension, retirement asset, and otherwise in Maryland involves a more detailed analysis, as well as involves federal applicable laws be considered, than shall be addressed here in this focused article on Maryland law.  It is fair to state that a divorcing spouse with a 401K account accrued during the marriage likely must share its value during the divorce.

In Allison v. Allison, the Court of Special Appeals held that a spouse facing divorce and needing legal advice can use his or her 401K account to obtain legal advice and representation, without being accused of wrongfully reducing marital funds to be shared.  The use must be reasonable in amount and purpose.

Gregg H. Mosson, Esq.

Mosson Law, LLC

www.mossonlaw.com

For information on representation in the fields of employment and family law, I invite you to get in touch. Please visit my website at www.mossonlaw.com.  The office is based in Towson, Maryland, and the practice ranges Maryland-wide.



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