Retirement savings can become a pivotal point of contention when a marriage comes to an end.
In the Lone Star State, divorce laws require a fair division of all marital property, including retirement savings.
Community property vs. separate property
Texas follows community property laws. This means that property acquired during the marriage is generally considered community property and subject to division. Retirement savings accumulated during the marriage are typically viewed as community property, regardless of who contributed to the account.
Qualified Domestic Relations Order
An important tool in the division of retirement savings in Texas divorces is the Qualified Domestic Relations Order. This legal document allows retirement account administrators to divide the funds in a retirement account between the divorcing spouses without triggering early withdrawal penalties or taxes.
Types of retirement accounts
Various types of retirement accounts can come into play during divorce proceedings, such as 401(k)s, IRAs, pensions and government retirement plans like the Texas County and District Retirement System. Each type of account may have its own rules and regulations governing division.
50-50 split not guaranteed
While the courts aim for an equitable distribution of assets, this does not always mean a 50-50 split of retirement savings. Courts take several factors into account when determining a fair division, such as the length of the marriage, each spouse’s financial situation and their respective contributions to the account.
While Texas has a low divorce rate of 1.4 per 1,000 people, many couples find divorcing the best solution. Understanding the division of assets, including retirement accounts, can help both parties better plan for their new future.