If you or your spouse contributed to a retirement account during your marriage, the portion contributed within that period is among the marital assets subject to division during divorce in Texas. As a community property state, you and your spouses jointly own any increase in value in 401(k)s, IRAs, pensions and other savings plans. It does not matter whose name is on the account.
If you cannot agree on dividing your retirement accounts and do not have a legally binding agreement on the same, the matter will have to be settled in court.
Retirement accounts are divided equally
Retirement accounts are treated like any other marital asset and divided on an equal basis, although courts strive for a just and right division. Additionally, there are different types of retirement accounts, each treated differently when dividing them up.
Learning more about what goes into dividing these assets, the type of pension plan involved in your divorce and how it works regarding the distribution of payments can help manage your expectations. It’s also worth noting that there are potential tax consequences you should be wary of when dividing retirement accounts, and prudent planning can help avoid unnecessary financial burdens.
Weigh your options carefully
You may not wish to hand over half your pension to your spouse or cash it out for various reasons. It could be due to the potential taxes or financial penalties involved. If so, you may consider offsetting what your ex would get with another asset of equal value.
You could, for instance, purchase a life insurance policy and name your ex as a beneficiary. Alternatively, if you both have retirement accounts that are close in value, you can agree to keep what each one of you has to simplify things.
Dividing retirement accounts can be complex, but it’s crucial to your post-divorce financial future. Seeking legal guidance can help clarify what you are entitled to and protect your interests, which can go a long way in ensuring you get the settlement you deserve.