Retirement accounts, such as 401(k)s, IRAs and pensions, often form part of the assets subject to property division in a divorce. However, these assets are difficult to divide because of their complex nature and possible implications.
Accordingly, having a basic idea of how courts distribute retirement funds in a divorce can set the parties’ expectations and help them address possible issues.
How do courts divide them?
In Texas, spouses presumably own properties that they acquire during their marriage equally. These assets are called community property. Unless there is clear and convincing proof that one spouse separately owns a property, it is community in nature.
However, this does not mean the courts have to divide properties equally during divorce. Instead, they will distribute assets between spouses, including retirement accounts, in a way that is just and right.
How do courts enforce the division?
Once courts award retirement benefits between spouses, specifically wherein one spouse receives a portion of the other’s retirement account, the division can be enforced only with a Qualified Domestic Relations Order (QDRO). As to when the employer disburses the funds, courts will provide the terms depending on the type of account, such as cash, pension and so on.
Does self-employment affect the distribution?
No. Under Texas laws, courts must consider both spouses’ rights in retirement plans, employment benefits or other similar plans during a divorce property division, regardless of whether one or both spouses are self-employed.
Preparing for complex issues with proper guidance
The matters above only pertain to the legal procedures of dividing retirement accounts in a divorce. More complex issues, like tax implications, can arise. Without proper research and competent guidance, any divorcing party risks their rights during the process.