What Divorcing Spouses Need to Know About Dividing Retirement Assets

 Posted on January 25, 2023 in Divorce

Getting a divorce can be a complex and stressful process, and there are a variety of issues that will need to be addressed before a marriage can be legally dissolved. Many of these issues will be related to the property division process, and disputes can arise between spouses about who should get what pieces of property or who will be responsible for certain debts. Of the different types of complex property issues that may need to be resolved, determining how to divide assets such as retirement savings accounts or pension benefits can be especially complicated. It is important for spouses to understand the applicable state laws that address the division of assets and the steps they can take to protect their financial interests.

Texas Law on Dividing Marital Assets

Under the Texas Family Code, all property acquired by either spouse during a couple's marriage is considered to be community property that is subject to division in a divorce. This includes any funds saved in retirement accounts or benefits that were earned during the course of the marriage. In Texas, all marital property is subject to “equitable division.” This means that the court will divide property between spouses in a manner that is considered to be "just and right." To determine how property should be divided, a variety of factors may be considered, including each spouse's age, health, earning capacity, education level, job-related skills, and more. Assets will not necessarily be divided 50/50 between the two parties; instead, the court will look at each party's individual situation and determine a way to divide assets as fairly as possible.

Retirement Assets and QDROs

Retirement accounts are considered marital property in Texas, and thus, they must be divided alongside other property during divorce proceedings. Retirement assets that may need to be addressed include 401(k)s, pension plans, IRAs, stock options, annuities, and deferred compensation plans. The ways these assets may be divided can vary depending on a couple's individual situation. For example, each spouse may maintain ownership of a 401(k) or IRA that is in their name, but if one spouse's account has a higher balance, some of the funds in their account may be transferred to the other spouse.

When dividing funds in retirement accounts or other retirement assets, spouses will usually need to file a Qualified Domestic Relations Order (QDRO). A QDRO is a legal document that orders a plan administrator to pay benefits from an employee’s qualified retirement account to an alternate payee—in this case, the other spouse. When using a QDRO to transfer funds, the account holder will not be required to pay penalties for withdrawing funds before retirement age. As long as the funds are rolled over into another retirement account, taxes will not need to be paid on the amount that is withdrawn. It is important to remember that QDROs can be complex documents, so it is best to have one drafted by an attorney who has experience handling family law matters. 

Contact Our Tarrant County Retirement Asset Division Lawyer

If you need to divide retirement accounts or other complex assets during your divorce, it is important to consult with an attorney who can help you understand the best ways to resolve disputes while protecting your financial interests. At Daniel R. Bacalis, P.C., our Hurst, TX property division attorney can provide guidance during your divorce and help you understand how the laws apply in your situation. We will advocate on your behalf and help you find solutions that will provide you with the financial resources you need after you complete the divorce process. Contact us at 817-498-4105 to arrange a free consultation.

Sources:

https://statutes.capitol.texas.gov/Docs/FA/htm/FA.7.htm

https://www.ers.texas.gov/Contact-ERS/Additional-Resources/FAQs/Qualified-Domestic-Relations-Order-(QDRO)