One of the things my client or potential clients are often concerned about during their Texas divorce is their retirement accounts. They want to know if they are going to be able to keep their retirement. The answer to that question as with many questions of law depends on the facts of each case.
Your Retirement May be Community Property
Under Texas law, income earned during the course of a marriage considered to be joint, community property. In the same manner retirement savings, whether in the form of an IRA, 401K or pension, are also joint property if earned during the marriage. It is not as simple as taking half of what is in your account and ceding it to your spouse, however.
When a couple divorces, each spouse has an interest to part of the retirement benefits that have accrued during the time period that they were married. This means that all of the monetary contributions made, gains and losses in the account that came to be during the marriage are fair game.
When going through a Texas divorce you will need to gather all the information you can regarding your retirement accounts such as:
- The start date
- The most recent statement and
- The plan administrator’s contact information
- Any documentation showing what you had in your retirement account prior to marriage
Part of Your Retirement May be Separate Property
It is important to figure out what was in your retirement accounts prior to marriage. As discussed Texas is a community property state. The presumption in Texas is that anything owned during the marriage is presumed to be community property and is thus divisible by the Court.
However, if you can prove that part of the retirement account is separate property, then the Court cannot divide or award your spouse the portion of the retirement account that is separate property.
In Texas, separate property is property that:
- you owned it prior to marriage
- Inherited either prior to or during the marriage, or
- was gifted to you either prior to or during the marriage
If you are going through a Texas Divorce, it is your burden to prove that you owned retirement accounts prior to the marriage. One good way to prove that you owned a retirement account prior to marriage is by producing the statement from the month prior to marriage that shows the balance in the retirement account at that time. It is important to start gathering this information early on in the divorce not later. If you cannot prove what you owned prior to marriage then the Court will treat it all as community property.
How is Retirement Divided after a Texas Divorce?
How does the retirement pie gets sliced up? As with other areas of the divorce, how the retirement account is divided can be negotiable.
There is no set amount that needs to be divided- in some cases, the parties will agree to not touch one retirement account or another. Typically cases do settle prior to a trial and the court will typically accept whatever division the parties deem to be equitable.
Qualified Domestic Relations Orders
Retirement accounts such as a 401K or pensions will involve additional steps and documents to in order to divide these types of retirement accounts. In addition to the final divorce decree dividing an additional order known of as a Qualified Domestic Relations Order is needed.
A Qualified Domestic Relations Order (QDRO) is a special court order that is sent to the retirement plan's administrator for processing. A QDRO is a legal tool that divides a retirement account into two separate accounts between spouses. The QDRO will:
- Set the date the division of the retirement account will occur. For example, the retirement account will be divided as of the date of divorce or another date as stated in the QDRO.
- The QDRO will set the percentage or dollar amount each spouse will be awarded from the retirement.
- If there is a loan against the retirement account the QDRO will say which spouse will assume responsibility for that loan.
If the order is not received, approved and qualified by the plan it has no legal effect and the former spouse's assets cannot be divided.
Many plan administrators have their own recommended QDRO that they prefer for participants to use. Some QDROs can be rather complicated and it is not done right the QDRO may be rejected and then it will have to be redone. It is possible to have QDRO submitted to the plan administrator for prior approval before having the Judge sign the QDRO.
Retirement assets are some of the most contested and highly important in any divorce case. With that being said, the attorneys with the Law Office of Bryan Fagan, PLLC are qualified in our own right to discuss your case and the individual situation with you. Our office works almost 100 percent on family law cases and consultations with one of our attorneys are free of charge.
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Other Articles you may be interested in regarding retirement accounts
- Texas Divorce and Retirement & Employment Benefits by the Numbers
- Is Social Security Considered Separate Property in a Texas Divorce?
- Dividing Property in a Texas Divorce - The Just and Right Division
- Why is Separate Property Important and How to Keep it Separate in a Texas Divorce?
- What Wikipedia Can’t Tell you About Texas Divorce and Marital Property Division
- Texas Divorce Property Division Enforcement
- Separate Property in a Texas Divorce?
- Does it Matter Whose Name is on Title or Deed of Property in a Divorce in Texas?
- Business Owners and Business Assets in a Texas Divorce
- Dividing a Pension in your divorce
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