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Retirement Accounts and Divorce

You may be beginning the divorce process and are unsure how retirement accounts must be divided. Texas law requires equitable distribution of all marital assets. The term equitable does not guarantee equal division, but the courts will consider what is a fair distribution of assets based on certain criteria. 

Included in the asset division are retirement contributions. This distribution is complicated without the guidance of an experienced Texas divorce attorney specializing in asset division. 

Retirement Accounts

There are various retirement accounts you and a spouse may have contributed to, such as:

  • 401(k) savings accounts
  • Individual retirement accounts (IRAs)
  • Pension plans
  • Deferred compensation accounts
  • Texas$aver state retirement plans
  • Thrift savings plan (TSP) federal retirement plans

Community Property

Retirement accounts are considered community property when the contributions were made while being married. Any interest earned on the contributions also qualifies as community property. 

Separate Property

Any contributions to retirement accounts and accumulated interest made before the marriage are deemed separate property. It is also possible that these accounts can be both community and separate property. 

Is it Possible to Keep My Retirement Accounts?

You do have options to keep your retirement accounts, but it requires working together. An effective way to do this is through divorce mediation

You each have the option to retain your accounts and not divide them. There is also the option of a cash-out, where one spouse receives a lump sum, forfeiting any future benefits from the account. 

Additionally, other community property can be exchanged for the value of their share of a retirement account. For example, your share of a spouse’s retirement account may be $50,000, but you have a boat that is community property worth that value and you have grown fond of it. If you and your spouse agree, you can keep the boat while letting your partner retain the cash in their account. 

How is Division Ordered?

The type of account will determine how the account division is ordered. The way you receive the funds will depend on the plan’s administrator. The division of IRAs can be ordered in a divorce decree by family court. 

But other retirement accounts, such as a 401(k), through a spouse’s employer may require a qualified relations domestic order (QRDO). This document recognizes the right of someone else to a portion of the funds and provides authorization for these funds to be paid to an ex-spouse.

Federal Retirement Plans

Still, other accounts, such as federal savings plans, will require a Retirement Benefits Court Order (RBCO). An experienced divorce attorney in Austin can ensure that all the proper paperwork is filed for each account.

To receive benefits from a spouse’s military retirement, you must have been married at least ten years. Your benefits are determined by their years of service and how many of those years you were married.

Additionally, a spouse’s work history and the benefits you are eligible to receive in relation to your own past employment will determine your social security spousal benefits.

Trusted Texas Divorce Attorneys

Despite the type of retirement account, spouses cannot conceal retirement funds from the other spouse without risking legal action. The realities of divorce and how funds will sustain through retirement are concerning for many couples. But the process can be complicated and overwhelming.

Let our team help remove the barriers to a secure future as you prepare for this next phase in life. A free consultation with a compassionate Texas divorce attorney in our Austin or Bastrop offices can begin to relieve your fears and uncertainty.