Can I Keep My Retirement in a Texas Divorce?

One of the first homework assignments we give our clients who are going through a divorce in Houston, Texas, is to gather all the information you can regarding your retirement accounts such as:

  1. the start date
  2. the balance of retirement accounts prior to marriage
  3. the most recent statement for each retirement account and
  4. the plan administrator’s contact information for each account.

Aside from a house often retirement accounts are often the biggest asset of a marriage. Which often leads to questions on will a spouse get to keep their retirement account or will they be required to share it with their Ex. In today’s we will discuss how retirement accounts are treated in a Texas divorce.

Types of Retirement

Generally, retirement accounts can be divided into two categories:

  1. Defined Contribution Plans and
  2. Defined Benefit Plans

Defined Contribution Plans

Under a defined contribution plan, the employee, or both the employee and employer contribute money or stock to a retirement account.

Examples of these types of plans include:

  1. 401(k) plans
  2. Employee stock ownership plans (ESOPs)
  3. Profit Sharing plan
  4. Thrift Savings Plans
  5. Keogh: Retirement plans for people who are self-employed.

In most circumstances these types of plans are partitioned or divided among spouses by using Qualified Domestic Relations Order (QDRO) or Domestic Relations Order (DRO).

Defined Benefit Plans

Defined Benefit Retirement Plans (or pensions) involve an employer paying an employee a monthly amount for life during retirement. This amount is calculated using a formula that considers factors, such as:

  1. length of employment and
  2. salary history

These types of plans are less common now but you can still find some corporations or government plans that still provide pensions to their employees.

In most circumstances these types of plans are partitioned or divided among spouses by using Qualified Domestic Relations Order (QDRO) or Domestic Relations Order (DRO).

Do retirement benefits belong to both spouses?

In order to determine whether there is a claim by the other spouse to a retirement account will depend on when contributions were made to the account.

One important thing to keep in mind is that Texas community and separate property rules apply to retirement accounts just like any other marital property.

The General Texas Community Property Rule is that:

  1. There is a rebuttable presumption that all property owned at marriage is community property.
  2. To rebut this presumption, spouses must provide clear and convincing evidence that a asset is separate property in Texas.

Separate Property in Texas is

property acquired before marriage,

property acquired during marriage by gift, devise or descent

property acquired during marriage, but purchased with separate property funds

Thus, any retirement acquired during the marriage is community property and is thus divisible by the Court.

Why Separate Property Matters?

Separate property matters because if property can be shown to be separate it will not be divided by a court because it is not marital property.

Retirement accounts can be a mixture of community and separate property. One reason is that the retirement account existed prior to the marriage and community money was added to it after.

This is why knowing:

  1. The start date of the retirement account
  2. The balance of the account prior to marriage and
  3. The current balance of the account

If the account had a balance in it prior to the marriage it may be possible to protect a portion of the retirement account as separate property.

Does the Length of the Marriage Matter when Dividing Retirement?

Length of marriage may matter for some retirement accounts. Plans such as 401(k)s) can be divided on divorce no matter how long you have been married.

A court has more discretion regarding how these retirement counts are divided.

Some plans such as:

  1. Pensions
  2. Social Security spousal benefits and
  3. military retirement

Are governed by different rules and the length of marriage may make a difference.

How do I find out if my spouse has retirement?

During the Texas divorce process, it is important to investigate and do discovery to determine what marital assets exists. One place to start is by looking at your spouse’s pay stub. If your spouse is making contributions to an employer retirement program these contributions should appear on his pay stub.

Another thing to look for would be statement that is sent out prior to tax time by retirement accounts.

Dividing up Retirement Accounts

As mentioned above wants it is determined how a retirement such as a 401K or a pension should be divided. The proper steps for allocating the money to the correct spouse is:

  1. To list it out in the final divorce decree and
  2. The preparation of an additional order called a Qualified Domestic Relations Order (QDRO)
  3. These orders will be signed by the Court.
  4. Once a QDRO is signed by the Judge, the next step is to forward it to the plan administrator for processing.

Some things to know about QDRO’s include:

  1. Each plan administrator has a suggested that they prefer for participants to use.
  2. QDROs can be complicated
  3. You can avoid some headaches by getting a QDRO preapproved by the plan administrator prior to the Judge signing the QDRO. This is because a plan administrator my reject the QDRO then you will have to go to some additional steps.
  4. A QDRO divides a retirement account into two separate accounts.

Dividing Up the Retirement Account in the Wrong Manner

One of the first thing to realize is that retirement and employee benefits will more than likely be divided up during a divorce. This will require a determination of which law is applicable to the particular retirement plan.

It is important to understand the retirement account that is being divided to make sure that division is handled properly. This can help avoid the headache of dividing a plan in a way that is not allowed.

If that should happen it may be necessary to file a separate lawsuit after the divorce under sections 9.101 – 9.106 of the Texas Family Code.

Is there a way to prevent my spouse from Cashing Out their Retirement during the Divorce?

Yes, if there is an ongoing divorce you can send the employer and plan administrator notice of the ongoing divorce along with:

  1. A Temporary Restraining Order signed by the Judge or
  2. A copy of the Standing Order for that county if one exists

If your spouse has been served notice of one these documents and succeeds in cashing out a retirement account before you have an opportunity to give notice to the plan, then your spouse can be held in contempt of court.

This is a good reason to have copies as much financial information as possible when filing for divorce this way your Houston divorce lawyer can help send notice where it is needed.

Is there a way that I can Keep My Retirement Benefits when I Divorce?

Options for making sure you keep your retirement benefits include:

  1. Reaching an agreement with your spouse. If you and your spouse agree to keep your own retirement accounts a court will not force you to divide them.
  2. Another option is to buy your spouse out of your retirement by giving her something in exchange for the equity she might have been entitled to receive.
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Other Articles you may be interested on regarding retirement accounts

  1. Texas Divorce and Retirement & Employment Benefits by the Numbers
  2. Is Social Security Considered Separate Property in a Texas Divorce?
  3. Will My Spouse Get Part of My Retirement in Our Texas Divorce?
  4. Dividing Property in a Texas Divorce - The Just and Right Division
  5. Why is Separate Property Important and How to Keep it Separate in a Texas Divorce?
  6. What Wikipedia Can’t Tell you About Texas Divorce and Marital Property Division
  7. Texas Divorce Property Division Enforcement
  8. Separate Property in a Texas Divorce?
  9. Does it Matter Whose Name is on Title or Deed of Property in a Divorce in Texas?
  10. Business Owners and Business Assets in a Texas Divorce

Law Office of Bryan Fagan | Houston, Texas Divorce Lawyers

The Law Office of Bryan Fagan routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with one of our Houston, TX Divorce Lawyers right away to protect your rights.

Our divorce lawyers in Houston TX are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan handles Divorce cases in Houston, Texas, Cypress, Klein, Humble, Kingwood, Tomball, The Woodlands, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.

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