Texas residents who are considering a divorce should be fully aware of its financial implications. Since many are saving for retirement, they may wonder what will happen to their 401(k) or other retirement accounts. While each situation is different, there are a few basic things to expect.
Prenuptial agreements allow couples to customize a financial plan to be followed in case they divorce in the future. If a prenuptial agreement was signed prior to the wedding date, whatever was indicated as far as retirement savings will be followed.
If a couple never signed a prenuptial agreement, it is most likely that the retirement savings will be divided during the divorce. Contributions made to the account during the marriage, including by the employer, will likely be viewed as marital property. Somethings that may affect how retirement accounts are divided include the amount of income each spouse earns and how much each individual contributed to the account.
It may be possible for a spouse to negotiate a lump sum from their spouse’s 401(k). However, before a person decides to do this, they need to look at the penalties that are involved. Unless a person really needs the cash, it may be better for them to forget this idea.
Some couples are able to sit down with each other before they finalize their divorce and come up with a mutually satisfactory agreement. Taking divorce to court typically brings about results that neither individual feels happy with and ends up costing them each a lot of money. A person may want to have an attorney present in order to be sure that all of the details are included in this agreement. The attorney could answer questions a person may have regarding property division, community property and other divorce legal issues.