Divorce and the subsequent division of marital property can threaten years of careful retirement planning and savings. With retirement accounts often making up over half of a couple’s wealth, protecting these assets becomes crucial during divorce negotiations.
In Texas, retirement benefits earned during marriage count as community property. So, both you and your spouse have equal rights to these savings.
How Texas splits retirement benefits
The Lone Star State has special rules about dividing property after divorce. While Texas is one of the few community property states, marital assets are still not split 50/50. Instead, the court looks for equitable or fair ways to divide things. Courts consider several factors, such as how long you were married and your ability to earn money.
Different ways to divide retirement accounts
Once the court gives the order on how to split the assets, the actual process will vary based on the retirement accounts you or your spouse have.
- Individual retirement accounts (IRAs): These are the easiest to divide. A transfer incident to divorce allows you to transfer money between accounts without paying extra fees or taxes. Just make sure your transfer papers clearly indicate that these are due to divorce to avoid penalties or problems with the IRS.
- 401(k)s and pensions: Employer-sponsored or defined benefit plans require a Qualified Domestic Relations Order (QDRO). This document is a court order telling plan administrators how to split benefits between you and your former spouse. QDROs also allow you to avoid early withdrawal penalties.
- Government pensions: Military retirement and government pensions usually require specialized orders beyond standard QDROs.
While you can request a QDRO by yourself, these complex legal documents often require specialized knowledge of retirement plans and state law. Getting professional legal assistance can save you from costly mistakes and lengthy delays.
Protecting your financial future
Splitting retirement accounts can get tricky, especially if you have several accounts or started saving before marriage. Protect your post-divorce financial security with the help of a legal professional. Working with an experienced divorce attorney can help ensure you obtain the necessary documents for a smooth and less stressful process.
