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Some facts about retirement accounts and divorce

On Behalf of | Feb 11, 2022 | Divorce

Divorce is never easy in Texas, but it can be especially complicated when it comes to retirement accounts. This is because these accounts are often a large asset in a couple’s combined wealth, and everyone will typically want to ensure that their share of the retirement assets is preserved.

What kinds of retirement accounts do couples typically have?

Retirement assets can include pensions, 401(k)s and IRAs. In addition to these traditional retirement accounts, there may also be Roth IRAs or private pensions. It is important to know the particulars of each account as this will help in dividing them up fairly during a divorce.

How are retirement assets divided in a divorce?

There is no one-size-fits-all answer to this question; the division of retirement accounts is often based on the specific circumstances of each couple. However, there are some general principles that can help couples determine how their retirement accounts should get divided.

Are the funds marital property? Property division during a divorce is usually based on the principle of equitable distribution, which means that the court will divide assets and debts in an “equitable” manner. What this means varies greatly from case to case, but the court will typically look at how long a couple had been in their marriage, who was employed during the marriage and what income each spouse brought in.

Is there a prenuptial agreement? If a couple had signed a prenuptial agreement before getting married, this may dictate how retirement funds should get divided up.

The qualified domestic relations order

When dividing retirement accounts during a divorce, it is important to understand that the QDRO is what enables you to divide your account. This document lays out details such as how much of an account each spouse should receive and when they can access their share. It also lays out whether taxes need to get paid on any portion received and who’s responsible for any fees.

One important thing to note is that the QDRO cannot split an account in half; it can only award assets to one spouse or the other. This means that if there is a large retirement account and one spouse wants to keep it, they may need to negotiate with their partner outside of court.

Ultimately, it is important to have a clear understanding of the different types of retirement accounts that exist and how they will get divided in a divorce. This information can help couples reach a fair agreement without having to go to court.