Protecting Your Family's Future
 

Understanding Retirement Fund Division During Divorce

Dividing Retirement Funds in a Texas Divorce

When people in Texas decide to divorce, they may be concerned about how it will affect their retirement years. Retirement accounts may be held in either person’s name, so the spouse who doesn’t own the account may be unsure about how the divorce will affect his or her ability to retire in the future. When you understand more about property division, it can help you make the right decisions for yourself and your family.

Marital Retirement Fund Contributions Are Community Property

Contributions that were made to retirement accounts during the marriage are considered community property. While premarital contributions are considered separate property, those made during the marriage are considered to belong to both partners regardless of whose name is on the account.

Different types of retirement accounts include:

  • IRAs (Individual Retirement Accounts)
  • 401(k) and 403(b) plans
  • Roth IRAs
  • Company pension plans
  • Defined contribution accounts

In some cases, a single retirement account can contain both community property and separate property. If contributions to the account began before the marriage but continued throughout its duration, it will be necessary to value the account properly in order to understand the extent to which it can be divided in the divorce.
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Marriage Length Can Affect Retirement Fund Division

For retirement plans like 401(k)s, 403(b)s or IRAs, the length of the marriage is not important. The retirement funds do not need to be split evenly between the spouses. Separate property and community property must be divided, but judges can also make decisions that reflect unequal wealth, parenting time and other factors.

However, Social Security benefits, military retirement funds and some pensions have alternative rules about spousal eligibility. In these cases, the length of the marriage is relevant, and people who have been married for longer have greater rights. A Texas divorce lawyer can help people understand the value of their retirement funds and how divorce will affect them.

Military Retirement and Social Security Benefits

In order to be eligible to receive benefits under your spouse’s Social Security benefits, you must have been married for 10 years or longer. This type of access is based on your spouse’s work record. It can help people in long marriages where one person stayed home with the children while the other spouse worked at outside employment. The entitlement to spousal benefits can also depend on your own Social Security benefits that you accumulated through your work career. Spousal Social Security benefits after divorce do not diminish your spouse’s ability to access his or her full benefit.

Depending on how long your spouse served in the military, you may be able to access spousal military retirement benefits after divorce. If you are eligible, you would be able to receive payments directly from the military retirement system.

Researching Spousal Retirement Accounts

In cases where a divorce is more heavily contested or financial secrecy is an ongoing factor, one person may be concerned that his or her spouse is hiding retirement accounts. Employer-based programs are generally visible on an earnings statement or paycheck stub. Other types of accounts will often send statements or tax information. A Texas family law attorney can also help you research whether your spouse’s employer provides pension plans even if he or she intends to hide the information.

In addition, once a divorce has been filed, generally, neither party can make withdrawals from retirement accounts without a court order. In many cases, this type of restriction is automatic. In other situations, your family law attorney can seek a specific order from family court.

Properly Dividing a Retirement Fund

After the divorce is final, you can take action to make sure the retirement accounts in question are divided according to the agreement or court order. To divide an IRA, you will generally need only the divorce decree to enforce the order. However, in most other cases, such as with 401(k) plans, 403(b) plans or pensions, you will need a Qualified Domestic Relations Order (QDRO), which is a specialized court order for this purpose. This court order will be drafted by your lawyer and signed by the judge, and it will lay out the specific division requirements for the account. It is critical to divide these accounts properly in order to avoid hefty taxes and fees.

If you are concerned about how divorce could affect your retirement and need to plan for the future, reach out to a Texas family lawyer. Call us at Stewart Law PLLC at (281) 420-8020 to schedule an appointment at our office in Baytown.

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