Other than the marital home, the largest assets that many Texas couples have are their retirement accounts. After spending years of accumulating funds in employment-related retirement accounts such as 401Ks, the prospect of having to divide them in a divorce may not make either party happy, but in many cases, at least a portion will be included in the marital estate. However, couples should not go ahead and divide these assets on their own without first understanding the ramifications.
Removing funds from these accounts prior to retirement comes with significant tax ramifications. If a couple splits these accounts on their own, these taxes could cause each party to take a substantial financial hit depending on the amounts involved. Fortunately, divorcing parties can take avoid this issue by obtaining a qualified domestic relations order from the court.
A QDRO contains information needed by the plan administrator to distribute any funds being divided in the divorce. Before obtaining such an order, all details required to go into the order must be verified. Any mistake could end up costing one or both parties, and all of the effort would be wasted. What each party does with his or her share of the account is up to each of them.
Dividing assets in a Texas divorce requires at least some research regarding how to best do it in order to get the most out of each of them. This can be especially true when it comes to retirement accounts. In order to ensure that the details are properly handled, it might be beneficial to discuss the matter with an attorney prior to moving forward.
Source: thebalance.com, “What’s a QDRO?“, Melissa Phipps, Accessed on July 2, 2017