Divorce doesn’t just separate two people. It can also affect shared finances, including retirement savings. If you’re self-employed and have a Solo 401k, you might be wondering what happens to that account when a marriage ends.
Even if the plan is under your name, the assets inside may still be considered shared. That means your former spouse could be entitled to a portion, depending on your state’s property laws and how the account was funded.
This article will help you understand how Solo 401k plans are typically handled during divorce, what rules apply, and what steps you can take to protect your retirement savings. If you’re navigating a divorce or simply planning ahead, knowing these rules could make a meaningful difference.

The Solo 401k Handbook
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**Solo 401(k) eligibility and contribution limits depend on IRS rules. Tax benefits depend on your individual situation. Not all business owners or side-income earners qualify. 2025 limits ($70,000 or $77,500 with catch-up) depend on income and plan design. Plan administrators—not Carry—are responsible for compliance. Carry does not provide tax advice, consult a tax advisor.
📌 Also Read: How to Add Your Spouse to Your Solo 401k Plan
Can a Solo 401k Be Split in Divorce?
Solo 401k accounts are not automatically divided in a divorce, but they’re often part of the conversation. The court looks at several factors to decide if the account is considered shared property. These include the timing of contributions, how the business is structured, and state-specific marital property laws.
When Is a Solo 401k Considered Marital Property?
A Solo 401k may be considered marital property if:
✅ Contributions were made during the marriage
✅ The plan was funded using business income earned while married
✅ State law treats retirement plans as part of the marital estate
Solo 401k assets contributed before the marriage or from separate funds may be excluded, but this depends on your state and how clearly the records separate those contributions.
📝 Note: Each state has its own rules for dividing property during divorce. Some follow community property laws, where most assets earned during marriage are split evenly (50/50). Others use equitable distribution, which focuses on fair (not necessarily equal) division.
Does It Matter Whose Name the Solo 401k Is In?
No — ownership of the Solo 401k account does not determine whether it’s subject to division in a divorce. What matters is when and how the assets were accumulated.
Even if the account is solely under one spouse’s name and tied to their self-employed income, a court may still consider it marital property if contributions were made during the marriage. This applies whether the plan was opened before or during the marriage.
The IRS does not exempt retirement plans from division just because they are individually owned. In divorce proceedings, retirement accounts are often split using a Qualified Domestic Relations Order (QDRO), regardless of whose name is on the plan.
How Does a QDRO Divide a Solo 401k?
A Qualified Domestic Relations Order, or QDRO, is a legal order that directs the Solo 401k provider to distribute a portion of the account to the non-participant spouse (the “alternate payee”).
To be valid, a QDRO must:
✅ Specify the exact amount or percentage to be transferred
✅ Outline how and when the distribution will occur
✅ Be signed by a judge and meet IRS and plan administrator requirements
Once the QDRO is approved, the Solo 401k provider will review it. If everything checks out, the funds are typically transferred into another retirement account under the receiving spouse’s name.
📝 Note: Using a QDRO is important because it allows the split to happen without triggering early withdrawal penalties.
How Does the Other Spouse Get Their Share?
Once the QDRO is accepted by the Solo 401k provider, the alternate payee (receiving spouse) typically chooses between:
✅ Direct rollover to another retirement account (such as a traditional IRA)
✅ Lump-sum distribution
The receiving spouse decides how they want to handle the funds. Choosing a rollover avoids immediate taxes, while a lump sum counts as income and may be taxable in the year received.
Will There Be Taxes or Penalties?
If a Solo 401k is divided through a valid QDRO, the transfer is not taxed. This also avoids the 10 percent early withdrawal penalty, even if either spouse is under age 59½.
But if the receiving spouse chooses to take the money as a cash distribution instead of rolling it into another retirement account, that amount is generally taxed as ordinary income in the year it is received.
Note that QDRO rules are designed to let retirement accounts be divided in a divorce without triggering extra costs, but only if the process is followed correctly.
What Steps Should You Take if You’re Facing Divorce?
If divorce is on the horizon, it’s important to prepare early—especially when retirement savings like a Solo 401k are involved. The decisions made during this process can affect your long-term finances.
Here are some steps that may help:
✅ Step 1: Consult a family law attorney with experience in retirement account division
✅ Step 2: Gather your Solo 401k plan documents, including contribution records and account statements
✅ Step 3: Request a current valuation of the account to know its total balance
✅ Step 4: Explore asset trade-offs. In some cases, you may be able to keep the Solo 401k by offering other marital assets of equal value, like cash or property. This must be negotiated and included in the court-approved settlement.
✅ Step 5: Speak with a tax advisor or financial planner to understand the short- and long-term tax effects and other financial implications of a potential split.
✅ Step 6: Work with a Solo 401k provider familiar with QDROs, since not all are equipped to process them properly.
📌 Also Read: Publication 504 (2024), Divorced or Separated Individuals
Key Takeaways on Solo 401k and Divorce
Divorce can raise complicated questions about how to divide retirement savings, especially for self-employed individuals with a Solo 401k. Even though the account is individually managed, it may still be treated as marital property if contributions were made during the marriage. State laws play a key role in how ownership is determined.
In many cases, dividing a Solo 401k requires a court-approved QDRO. This legal step allows the account to be split without triggering early withdrawal penalties or tax issues. If you’re hoping to keep the full account, it might be possible through negotiation, often by offering other assets of equal value.
If you’re going through a divorce or planning for the possibility, it may be helpful to speak with a family law attorney, tax advisor, and Solo 401k provider. They can walk you through what to expect based on your specific situation and help ensure the process is handled properly. Having the right guidance can help ensure your Solo 401k — and your financial future — stays on track.
📌 Want to learn more about how divorce could affect your retirement accounts? The IRS explains when a QDRO is needed and how the process works:
How Divorce Affects Retirement Plans and QDRO Requirements
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