Have you worked for many years in a job that offers you a pension? Whether for a private company or a public-sector employer, an annuity provides you stable and consistent payments every month upon retirement. Since you got married, it has likely been your plan that you and your spouse would share these benefits once you all retired. However, if your spouse has filed for divorce, then you may be concerned with whether or not you will have to share those pension benefits when your divorce is finalized.
If you remove real estate from the conversation, retirement plans are typically the most valuable asset that is at issue in a divorce? We don't always think this way about retirement plans since there are many other essential considerations in a divorce. The reality is that for many of you reading this blog post, your divorce will occur many years before you even begin to consider retiring.
When was the last time that you even thought about your or your spouse's retirement plan? I have even heard of spouses who go through an entire divorce case and only remember about a retirement plan that they have not contributed to at the very end of the case. Many folks who have gone through a divorce case may have forgotten entirely about a retirement plan until after their case had been completed.
Don't allow yourself to be put into this situation. You can lose out on a massive part of what should have been a part of your community estate if you do not pursue the benefits and the money that is rightfully yours under the property and family laws of the state of Texas.
Hire an attorney if you are not sure what the status is of your retirement accounts
If you think that your spouse has a pension plan or other retirement account but are not sure, that is an excellent sign that you should consider hiring an experienced family law attorney to represent you. On the other hand, you may have a pension plan that you are well aware of but may not be sure how to protect it from being divided up unnecessarily or unfairly in your divorce. What can you do in a situation like this where you are not entirely sure how to proceed?
The best step for you to take regarding issues like these is to hire an experienced family law attorney to represent you and your interests. You should not be expected to know the ins and outs of family law sufficient to express yourself in a divorce. Attorneys handle difficult situations along with you and provide advice and guidance along the way. Retirement plans are an essential part of your divorce, and for all the work you did to contribute to that plan, you do not want to see it go up in smoke in your divorce.
A pension that is earned during your marriage is community property.
Community property is a phrase that you ought to become very familiar with as you begin to engage in the divorce process in Texas. It is presumed that all property acquired during your marriage is community property and thus divisible in your divorce between you and your spouse. It doesn't matter whose name is on the title to the asset. It doesn't matter whose income was utilized to make the purchase.
Texas marital property laws attempt to be more equitable than other states. The critical thing for us to understand is that odds are good that if you acquired property during your marriage, it could be divided in the divorce. This means cars, homes, personal property, and retirement contributions are all subject to division in the divorce. Even if you had contributed to your retirement plan before your marriage, the portion you contributed during your wedding would be considered community property. It is up to you all how the proceeds will be divided. If you cannot agree on division, then a judge will make the final call on how to do so.
There are many ways to divide community property in a divorce. The most straightforward method of doing so with a retirement plan is typically a Qualified Domestic Relations Order (QDRO). However, your particular pension may require additional or different steps to divide the assistance according to the terms of your final decree of divorce. To ensure that this step is followed correctly, it is advisable to hire an experienced family law attorney to assist you in doing so.
When your divorce is over and done with: turn in the necessary paperwork to the plan administrator for your pension as soon as possible.
The end of the divorce is a hectic time for attorneys and clients alike. Everyone is trying to finish off the case as well as possible. Your attorney is double-checking language in the final decree of divorce. You are trying to plan your next steps once the divorce is mercifully finalized. All of the details of your divorce just sort of melt away in a frenzy to just be done with the case. It's kind of like the last day of school before summer vacation: all the difficulties of the year sort of fade away as you take in the view right before you are released to summer freedom.
However, you do not want to forget to follow through with the details when dividing up a pension plan. The plan, the judge, and your ex-spouse cannot ensure that this portion of the divorce goes off without a hitch. That part is your responsibility. Suppose you have a private retirement plan that belongs to your spouse but needs to be divided up. In that case, you will need to have your attorney draft a Qualified Domestic Relations Order (QDRO) and submit it to the plan administrator for their review and approval. The plan will not pay out benefits correctly without this being done.
Think about your options before giving up your house to keep your pension
In some divorces, the clients will look for the easy way out and seek to divide up their community property in the way that takes the least amount of effort or thought. If your house is completely paid for, you may keep the house while your spouse keeps his pension plan. That way, there is little in the form of paperwork that has to be done. Money does not have to exchange hands, and everyone can walk away from the divorce without much fuss.
However, this may not be the best course of action to take, depending on your circumstances. You may be left at a significant disadvantage compared to your spouse at retirement time if you elect to take the house in your divorce to make everyone's lives simpler. I can relate to wanting to do this, but ultimately, you need to think about what is best for you in the long run and what options do you have to take advantage of.
It isn't easy to always plan when a pension plan is in play. This is because a pension is not like a 401(k) or IRA, where you can look up the account and get the exact value of the report on any given day. Pensions payout money monthly year down the road. As a result, reaching a total value of the retirement in current-day dollars can take some effort.
Do not let the emotional value of your home take precedence over the actual value of a pension account, the proceeds of which you have a vested interest. It may be the easier route to take solace in your home and retreat to the house when everything else is crumbling around you. The stability of your home may be something that you are seeking at this time. However, in a decade, you may look back at that decision as being one that was costly to you and your future self.
Finances, in general, are crucial in a divorce.
It is not just your pension plan that needs to be addressed within the divorce. Your finances need to be attended to, or you risk them getting out of control and harming your life now and in the future. It is normal to want to protect your security moving forward. Your finances may have fallen into disrepair in the years preceding your divorce. Your checking, savings, retirement, other investments, and even your estate plan may need to be reviewed for possible changes.
Especially for those of you reading this blog post which is getting up there in years, you may need to consider selling your home, going back to work, or even cashing out a whole life insurance policy so that you can use the money for other pursuits. Even if none of these considerations are relevant in your own life, you should be aware that living alone after divorce means that the security that you had in having a two-income household has been taken away due to the divorce.
Be aware that community property includes all of the money that you or your spouse earned during your marriage. Actual, much of it has been spent and invested at this stage in your life. When considering what property makes up your community estate, you can then trace that money to personal property, investments, and real estate. You need to look over your life with a fine-tooth comb and feel what property is part of the community estate and will need to be divided up in the divorce.
What should you do with your family home?
From my experience representing clients in divorce cases, I think one of the main issues is that taking on the family home after a divorce is not always a smart move. People want to exchange the unknown of pushing and negotiating for a share of the community estate for the stability and supposed predictability of keeping the family home. This can be a mistake for many people, especially if there is still a mortgage on the house.
Keep in mind that if your family home still has a mortgage attached, you will be responsible for making those mortgage payments on your reduced household income. Even if you expect to be paid spousal maintenance in the divorce, there is no guarantee that those payments will always come in full and in time. This can put you in a precarious position as far as paying that loan. You may be better off selling the house and splitting the equity with your spouse after the divorce has concluded.
Whatever decision you decide to make with the house needs to be made from a position that is willing to consider other options. There is never just one choice for you to make. Consult with your attorney on which option is the one you should choose in all areas of your divorce, including what to do with your marital home.
Questions about the pension and your divorce? Contact the Law Office of Bryan Fagan
If you have any questions about the blog post from today, please consider contacting the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week where we can answer your questions and provide you with specific feedback based on your particular circumstances. We appreciate the opportunity to serve our community by providing effective representation for our clients. Thank you for choosing to spend part of your day with us here, and we hope you will be by tomorrow as we post another blog related to Texas family law.
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