Your pension that you earned while working for the government or other employer technically does count as property and is eligible to be divided in a Texas divorce. I know that when we think about property we consider real estate and personal possessions as being more or less what property refers to. However, money held in bank accounts, retirement assets and other financial assets will count towards the property division in your divorce. It is important to understand what sort of claim your spouse can make on your pension as your case moves forward.
If your divorce makes it all the way to a judge then he or she will have the option to divide the pension plan according to the “just and right” standard. This means that the judge has a lot of personal discretion about how to divide up the pension. The specific factors and circumstances of your case will play a part in that discussion. Depending on the size of your community estate as well as the sizes of both your and your spouse’s separate estates, the pension plan could be divided up in any number of ways.
Since Texas is a community property state, any contributions to your pension plan made during the marriage are considered to be community property. As long as you work for your employer for a long enough period of time then you would be able to receive a monthly payout from your pension when you retire. The contributions that you made over the course of your time working for that employer would be returned to you if you do not work long enough to become vested. The contributions that your employer makes into your pension would revert back to the employer.
Pension plans are known as defined benefit plans in the retirement/savings world. This sort of plan allows you to receive a monthly income as determined by the contributions made into the plan over the course of your working life. On the other hand, a defined contribution plan is what a 401(k) or Individual Retirement Account (IRA) is classified as. These type of accounts allow you to withdraw amounts of money penalty free after you reach age 59.5. You are not bound by a certain withdrawal amount each month, but you need to be aware of how much is in the account to avoid overdrawing, leaving yourself with nothing left.
What happens if you are not retired at the time of your divorce?
In the event that you have not yet retired at the time of your divorce, you final decree of divorce must specify which portion of your pension plan (if any) that your spouse will take with her after the divorce concludes. The value of the pension will be determined at the date of your divorce and not what the actual value of the plan is. Your spouse will not be able to take advantage of the full value of their community property interest, therefore.
After the divorce is over, your spouse will not have the ability to come back and try to get more of your pension plan for herself. All contributions and the value of the plan after your divorce has concluded will be a part of your separate estate and your spouse would have no ability to claim that value as her own.
What happens in the actual division of your community estate?
Either you and your spouse or a judge must first determine what property belongs in the community estate and what property belongs outside of the community estate. Once this is established then the division process occurs. Your pension will not be a topic for division until the end of your divorce. You will have other, more pressing issues to attend to in the beginning and middle stages of your divorce. Examples of these more pressing issues include child support, child custody, determining who will be paying what bills during the divorce, etc.
Another factor to consider is that the amount of community property awarded to your spouse other than your pension will impact how the pension is divided. For example, if your spouse is awarded the lion’s share of your community estate and has a substantial amount of separate property it is unlikely that your pension will be divided in such a way that your spouse ends up getting a majority of its value. Keep in mind that community property is typically divided equally between spouses, however, so your situation may not work out exactly in this way. If “fairness” dictates that your spouse walk away with a hefty portion of your pension plan then that may be what ends occurring.
What factors will determine how your pension plan is divided?
Specifically, the court will look to a number of factors in your divorce when dividing up your community estate in general (which will include all or most of your pension). The age of spouse will be considered. If your spouse is nearing retirement age then it is possible that the judge would be more likely to divide the pension plan in such a way to make sure that your spouse is taken care of in their golden years. This is especially true if your spouse has not worked and has no retirement savings from her own employment history.
Next, the judge will look at your educational level versus that of your spouse. Many times one spouse will have a far greater educational background than their spouse. If you have earned your pension through working for the government then you may possess at least one advanced degree. Compare this to your spouse who chose to stay home and care for your children while you were working and/or earning those degrees. A community property state such as Texas takes this sort of circumstance into consideration.
Earning capacity of you and your spouse will also be considered. There is an obvious connection between educational level and earning capacity. Again, if your spouse has a high school educational while you have a few advanced degrees it is likely that you are either in a well-established career or are capable of finding employment with relative ease. If your spouse would not be able to say the same then your pension may be divided up with her receiving a disproportionately high share of the plan.
The last factor I wanted to bring to your attention is fault in the breakup of the marriage. For instance, if you did something that directly led to the divorce
What is a Qualified Domestic Relations Order?
Once the judge figures out how much of your pension your spouse should receive in the divorced you and your attorney will need to draft a Qualified Domestic Relations Order (QDRO). A QDRO will authorize the plan administration for your pension plan to be able to put into effect the division ordered by the judge as contained in your final decree of divorce. Without a QDRO the wheels cannot be put into motion that actually get your spouse the money that she is entitled to.
Your attorney should contact the plan administrator for your pension early in your divorce to figure out what language needs to be inserted into the QDRO in order for it to be accepted by the plan. You can request this information for your attorney and provide it to him or at least get him the contact information for your plan administrator. If your lawyer drafts the QDRO without first consulting with the plan administrator it is unlikely that the QDRO will be accepted. This will put you into a position where your divorce will be finalized but the QDRO is still outstanding. Imagine graduating from high school but being told that you have a final exam yet to take. This is essentially the same thing.
The frequency with which payments must come out of the QDRO to pay your spouse, how long the payments are applicable as well as contact information for both you and your ex-spouse must also be included in the QDRO. This is a detailed document, and an important one at that. If for no other reason I would recommend that you hire a lawyer to draft the QDRO and make sure that it is taken care of correctly. Mistakes could delay your divorce or cause you and your spouse a long and contentious post-divorce period.
Once you have gotten the plan administrator for your pension plan to accept the QDRO then your spouse will be able to receive payments as per the QDRO. The next logical question to ask I when your spouse will actually be able to start taking out the benefits. It all depends on the type of pension that you have. In some pension plans your spouse will be allowed to receive lump sum payments as early as the time that the QDRO is approved. In the event that you have a 401(k) or IRA it is more likely that your spouse will receive monthly payments from the retirement plan. In other cases your spouse will not able to get any payments until you reach retirement age or actually retire from your employer.
What about military pensions?
Members of the military contribute through years of service to their pension plan, as opposed to making monetary contributions as a civilian would. Twenty years of active duty service needs to be reached in order for a military member to be eligible to receive military retirement benefits. Once you retire after at least twenty years of service you would receive a monthly amount of money out of your pension. Your total years served, your pay rate at the time of your retirement and cost of living adjustments will all determine how much your pension is worth on a monthly basis.
If you and/or your spouse are in the military then the pension(s) in question can be divided in a Texas divorce. A federal law known as the Uniformed Services Former Spouses Protection Act will determine how much of your military pension would go to your spouse in the divorce. The key difference is that at most 50% of your pension may be awarded to your spouse in a divorce. Dividing up a military pension is based as much in math as in anything else.
Dividing up military pensions can include providing a specific dollar amount to your spouse, a percentage of the total pension value or a fraction of the total amount. The fraction method uses a formula where the number of years that you have served in the military during which you were also married will be divided by the total number of years that you served in the military at the time that you are projected to retire. The retired pay from your pension may be paid to your ex-spouse directly.
Military pension division works differently than civilian pension division. If you are concerned with protecting your military pension then you need to have a plan in place at the outset of your divorce. If you wait until final mediation to develop a plan you will find that your spouse will already have a plan in place and that you will be at a disadvantage.
Questions about dividing a pension in your divorce? Contact the Law Office of Bryan Fagan
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