Once you have figured out what retirement plans are in place for you and your spouse, collected information from each and provided that to your attorney, you will need to know how a retirement plan can be divided in the context of your Texas divorce.
Dividing Retirement Plans- Options, Options
The simple and time-tested method for dividing up retirement plans in a divorce is to split each in half and allow both you and your spouse to walk away from the divorce. This can occur if both of your retirement accounts are basically the same or if you or your spouse will be allowing the other a greater share of the remainder of the community estate in the event that your retirement benefits are not close to equal.
There are other ways to divide retirement, however. If you are at a small deficit in terms of retirement benefits you and your spouse could just agree for you to receive whatever dollar amount from your spouse’s retirement that would equalize your shares.
This can be difficult to determine if there is an actual pension involved as there is no specific dollar amount listed for an account, only an anticipated monthly payout upon retirement. In this case, someone who is trained in assessing the value of pensions may need to be retained in order to provide this information to you and your attorney.
If your spouse were to ask you to trade your claim to their pension in exchange for being able to remain in the house as the 100% owner, would this be something that you could consider? Many people would jump at this opportunity thinking of the short term benefit being potentially greater than the long-term advantages in financial security that a pension could provide.
Consider, however, that the house has costs associated with it- taxes, upkeep, and likely a monthly mortgage payment. Or if you decide to sell the house it is possible to suffer tax consequences there as well. While a house is almost always a good investment to make considering the value of homes has really only seen one decline since the Great Depression (that would be in 2008), you should always consider your options and not necessarily agree to something just because it offers more immediate benefit for you.
Qualified Domestic Relations Orders (QDRO)
Qualified Domestic Relations Orders (QDRO for short) are separate orders that will be drafted in addition to your Final Decree of Divorce. Your attorney will draft and file this document based on the terms agreed to in your Final Decree of Divorce and will also reflect the necessary language that whichever retirement plan is being divided requires to be in an order.
Essentially the QDRO orders the plan administrator of the retirement plan to pay you a specific amount based on the terms of your Final Decree. It should be drafted along with your Final Decree of Divorce and submitted to the judge for their signature along with the Decree. Once it is signed by the judge your attorney will submit it along with the Decree to the plan administrator for the retirement plan.
Please make sure that your attorney drafts this document prior to the end of your divorce. It can be a huge point of frustration to have to go back into a divorce case and get the QDRO signed after the divorce has been completed. It is simpler to do so when your divorce case is still active. Without the QDRO none of what you negotiated upon in your divorce as far as the retirement benefits division can occur.
Keeping costs down in regard to your QDRO
I have seen some retirement plans charge money to process a QDRO. This does not occur often but can add insult to an injured divorce participant after their case has concluded. This fee will come out of your portion of the retirement benefits so it is smart to have your attorney contact the plan administrator to see if this will occur. Knowing this ahead of time can allow you to negotiate to see which spouse will pay the fee.
Finding out what your specific plan will require as far as language in the QDRO can reduce fees as well. Your plan may even have a sample QDRO that can be used to eliminate fees for processing the document.
The ready acceptance of the QDRO minimizes the risk of incurring fees and cuts down on the changes that your attorney will have to spend hours and hours drafting new QDROs to fit whatever the plan requires as far as language is concerned.
The details of actually collecting your retirement benefits
Are you going to be receiving a percentage of the benefits contained within a retirement plan or a specific dollar amount? The QDRO should state this. When you actually get the benefits awarded to you in the divorce to depend a great deal on what the language of the plan says.
Some plans allow for immediate “payouts” where a lump sum is money is offered. Others make you wait until retirement to be able to collect on the amount awarded to you. Still, others only issue awards on a percentage basis over time.
If you are significantly older than your spouse and the plan requires you to wait until he or she retires to collect your share, you may be waiting for some time.
Miscellaneous QDRO questions and a conclusion in tomorrow’s blog post from the Law Office of Bryan Fagan, PLLC
If you have questions regarding QDROs and retirement, in general, come on back to read tomorrow’s blog post from the Law Office of Bryan Fagan, PLLC.
In the meantime, if you would like to speak to one of our licensed family law attorneys please do not hesitate to contact us. We are standing by to take your calls and set you up with a free of charge consultation.
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Other Articles you may be interested in:
- Retiring with security after a Divorce
- Dividing a Pension in your divorce
- Proceeding into Divorce aware of risks regarding retirement division, Part Two
- Proceeding into Divorce aware of risks regarding retirement division
- Individual Retirement Accounts (IRAs) and your Divorce: Taxes and General Information
- Splitting retirement accounts in a Texas Divorce
- Social Security division in a Divorce
- Will Social Security Benefits play a substantial role in my Texas Divorce?
- Is Social Security Considered Separate Property in a Texas Divorce
- Key Elements of a Divorce for persons over the age of 50
- 7 Tips for Divorcing After Age 50 in Texas
- Divorcing After Age 50 in Texas: What it Can Mean for You and Your Spouse
- Texas Divorce and Retirement & Employment Benefits by the Numbers
Law Office of Bryan Fagan, PLLC | Houston, Texas Divorce Lawyers
The Law Office of Bryan Fagan, PLLC 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, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles Divorce cases in Houston, Texas, Cypress, Klein, Humble, Kingwood, Tomball, The Woodlands, Houston, 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.