June 22, 2016 | Share
Who Gets the Retirement Plan in a Divorce?
For anyone who has either built a substantial retirement savings or planned to rely upon their spouse’s savings in retirement, getting divorced can raise some very important questions about what to expect in the future. Are retirement assets subject to equitable distribution in Texas? If so, will I be required to give up (or am I entitled to receive) retirement benefits as part of my divorce?
Distribution of Retirement Assets in a Texas Divorce
1. Is the Retirement Plan Separate or Community Property?
The first issue to resolve when determining whether a retirement plan will be split in a divorce is to understand whether the plan is considered “separate” or “community” property. Generally speaking, in a divorce each spouse retains his or her own separate property, while the spouses’ community property gets divided according to the principles of equitable distribution.
Retirement assets can fall into either category. In some cases, they can even fall into both. For example, imagine that you began saving for retirement before you got married, and then you continued to make contributions and earn interest until the time that you or your spouse filed for divorce.
In this case, any assets that are attributable to your pre-marriage savings could be deemed separate property, while those attributable to your contributions during the marriage would generally be considered community property that is subject to distribution.
This can get complicated quickly with a wide variety of individual circumstances coming into play, and it is critical to make sure that you have a clear picture of the retirement assets that will (and won’t) be distributable in your divorce.
2. How Will You and Your Spouse Divide Your Community Property?
Assuming you or your spouse has a retirement plan that qualifies as community property, the next question is how you will split your community property in your divorce. “Equitable distribution” does not necessarily mean “equal distribution,” and if you and your spouse choose to use collaborative law or another non-adversarial method to finalize the terms of your divorce, you will have a significant amount of flexibility with regard to dividing your assets.
For example, while you may agree to split a retirement account, you could also agree that one spouse will keep the retirement plan while the other keeps the family residence. Of course, the numbers would have to make sense, and this may or may not be an option that works for you, but this is an example of the types of decisions divorcing spouses are able to make when it comes to dividing their community property.
3. How Will You Split the Retirement Plan(s)?
Finally, if you choose to split a retirement plan, you will need to decide how it should be split. While there are restrictions on dividing retirement plans, there are still a number of different options available.
The Qualified Domestic Relations Order (QDRO) is a common method for dividing retirement plans in Texas divorces; and, depending on the circumstances, you may be able to either (i) structure a one-time “cash-out,” (ii) transfer non-liquid assets from the plan holder to the other spouse, or (iii) arrange for both spouses to receive a portion of each pension payment over time.
Speak With an Allen Family Lawyer at Nordhaus Walpole, PLLC About Your Divorce
If you have questions about how your retirement assets will be divided in your divorce, our Allen family attorneys would be happy to sit down with you to discuss your personal circumstances. To arrange a free, confidential consultation with one of our experienced divorce attorneys, please call (214) 726-1450 or contact us online today.
Categories: Family Law & Divorce