Retirement Account Division During Divorce

Dec 10, 2021High Asset Divorce, Property Division

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In Texas, residents who have retirement accounts, during a divorce they can expect to be required to divide those accounts with their spouses, regardless of who contributed the funds. Texas is a community property state, thus Texas views the retirement fund balances accumulated during marriage as property of both spouses, and as such needs to be divided.

Different document types must be filed with each retirement plan(s) depending on the type of account. Common is the Qualified Domestic Relations Order, or QDRO. This document directs the plan administrator of 401(k) accounts, employer-sponsored plans and pensions to divide the amount and give the owed spouse their portion. If the retirement account is an individual retirement account, then a transfer incident form will be used. Using the correct forms is important as they then prevent taxes and penalties for the early withdrawals.

If a spouse has more than one individual account, each need their own filed document. Texas spouses are also allowed to negotiate how their assets will be divided, and if they come to an agreement, then the court will adopt the agreement as its order for the division of retirement assets.

In Texas, like every other state, property division is often one of the most hotly contested aspects of a divorce. Those Texas residents who stand to have their retirement accounts divided may want to get help from a family law attorney. An attorney may be able to negotiate an agreement with the other spouse in which their client agrees to pay spousal support of a greater amount or agrees to give up other types of assets in exchange for protecting their retirement account balances. People need to approach property division with an eye towards their financial future and their ability to retire and not get mired in conflict.

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