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What happens to your retirement account in a divorce?

On Behalf of | May 9, 2018 | Uncategorized

In some ways, success in your professional life can cause more issues when it comes time to divorce. The more assets you and your spouse accumulated during your marriage, the more decisions you will need to make about how to split them up. Couples rarely agree on how to divide major assets like pensions and retirement accounts. Barring a completely uncontested divorce or an ironclad prenuptial agreement, you may have to accept that you can’t control the outcome of your divorce or the asset division process.

Knowing that your financial future is in the hands of a judge can feel terrifying, especially if you aren’t sure how the courts will handle your case. Educating yourself about Texas divorce laws can help you understand the likely outcome of your divorce, especially as it pertains to your retirement savings or pension.

Texas is a community property state

Each state has its own approach to dividing the various assets you’ve acquired during your life. In Texas, they use the community property standard. That means that most of the assets you’ve acquired during marriage, as well as most debts, are subject to be split 50/50 in the divorce proceedings. Regardless of whose name is on an account or who purchased an asset, it belongs to the married couple, not just the individual.

Some assets will remain separate property, and these belongings and accounts will not get split in the divorce. Assets you owned prior to marriage, gifts and inheritances are common separate property that aren’t subject to division. However, there are some exceptions to this rule, including retirement accounts and pensions.

Retirement funds get divided based on dates, not names

You may think that because your retirement account is through your employer or because your pension is only in your name that it will remain your sole property in a divorce. Conversely, if your spouse has an employer pension, you might think that you don’t have any legal claim to those funds. However, the courts will look at when you accrued value in your pension, not whose name is on the account.

In other words, a spouse who stayed at home and supported the family by handling unpaid labor in the home has a claim to the retirement account of his or her working spouse. After all, the amount that accrued over time reflects the work of one spouse, as well as the unpaid support of the other.

Chances are strong that the courts will either order the division of your retirement funds with a Qualified Domestic Relations Order (QDRO) or offset the value of those funds by allocating different valuable assets to the other spouse. You may have to adjust your retirement plans and expectations as part of divorcing.


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