In a divorce, most individuals expect to divide assets such as income, the house, vehicles, and even the children, but when they are told that they must split their retirement savings or pension plans with their former spouse, they are shocked. After all, you expected to split the past with your ex, but now you have to share a piece of your future with them, as well?
According to the Texas Family Code, retirement pension plans are considered a part of the marital income, and income is considered joint marital property. As such, any retirement savings you and your former spouse had accumulated during the marriage is divided between the two of you in a divorce, despite each party’s contribution (or lack thereof) to the account.
How Much of Your Pension is Your Former Spouse Entitled to?
Fortunately, Texas does not force you to split your entire pension with your former spouse; you must only surrender half of what was accumulated during the duration of the marriage. In very rare instances, the court may grant one spouse interests in future retirement earnings if they feel that one spouse contributed more to the marriage than the other. Again though, this is a very rare occurrence.
Protecting Your Retirement in Divorce
There are a couple of ways that you can protect all or most of your retirement savings in a Texas divorce. The most effective way to protect your retirement assets is to get a prenuptial agreement. A prenuptial agreement is an agreement between two married individuals that usually establishes what will and will not be considered ‘marital property’ and how assets and debts will be divided in a divorce. However, hindsight is always 20/20, and for many individuals, it is too late to take proactive measures.
An effective reactive measure to protecting your pension during divorce is to sit down with your former spouse and try to come up with an agreement regarding the division of retirement assets. For instance, each of you may agree to only take what you contributed. Or, one of you may agree to take the 401(k), while the other agrees to take the house. If you can come to a mutual agreement, have your attorney draw up a ‘marital settlement agreement,’ which will be presented to the judge to make a decision during the final divorce hearing.
While you may be tempted to take money out of your 401(k) before filing for divorce, or shortly afterwards, many financial analysts recommend against this, as many pension plans come with penalties for withdrawing early. Furthermore, if the courts find out about your early withdrawal, you may be forced to pay back the amount.
Finally, many individuals are concerned that when half of their pension is withdrawn from their account and deposited into their former spouse’s account, their plan’s sponsor will penalize the account. When a court orders the division of retirement funds, they must also issue a qualified domestic relations order, or QDRO for short. The QDRO allows funds in the retirement account to be withdrawn and deposited into a different account without penalty.
Consult a Lawyer from Clark Law Group
The best way to protect your retirement funds during a Texas divorce is to contact an experienced divorce attorney. At the Clark Law Group, we understand that your retirement account is not just an accumulation of money – it is your future. We aim to protect your future by utilizing our skill and knowledge to negotiate a successful settlement agreement and to achieve the most desirable outcome possible. Schedule a consultation with our legal team at Clark Law Group by calling 469-906-2266 or contacting us online today.