Divorce and Retirement: How Financial Accounts Are Handled in a Texas Divorce

After the question of child custody and division of large assets like houses and vehicles, one of the most fought-over assets in a divorce are retirement accounts. Both spouses are eager to keep at least a portion of these funds that will serve them well into their golden years. To understand how retirement accounts are handled in a Texas divorce, it must first be understood that retirement accounts are considered assets and, therefore, subject to the “community property” rule. 

What Does it Mean That Texas is a Community Property State?

Texas is one of nine states that considers both spouses in a marriage to have equal ownership of all marital property. Therefore, judges often split assets equally (50/50) among spouses in a divorce. This goes for retirement accounts, as well; no matter whose name is on a retirement account or whose employer sponsors it, it will likely be split down the middle as long as contributions were made during the marriage. 

When determining whether a particular retirement account is separate or marital property, judges will look at the start date of the account, the current balance, and the balance prior to the marriage (if applicable). Spouses may be able to keep the portion of a specific retirement account that existed prior to the marriage (by having it designated as separate property). 

Qualified Domestic Relations Order

In many cases, you will be hit with tax penalties if you withdraw funds from your retirement accounts before you reach a certain age. There is a way around this when spouses are ordered to split retirement accounts as part of a divorce agreement. Through what’s called a Qualified Domestic Relations Order (QDRO), a document signed by a judge, spouses are legally entitled to receive their share of retirement benefits. 

Standing or Temporary Restraining Order

Even with potential tax penalties, individuals going through divorce will often try to withdraw retirement funds so their spouse doesn’t get too much of their “stuff.” This isn’t limited to retirement accounts, either; people will go to great lengths to hide assets during the discovery process of a divorce. To prevent this, a standing order or temporary restraining order can go into effect when the petition for divorce is filed; this order prevents spouses from taking certain actions, including taking out retirement funds. 

Conclusion

Put simply, many retirement accounts are treated the same as normal assets during a Texas divorce. However, this blog did not explore what happens with Social Security benefits, pensions, or military retirement benefits. To ensure you receive what you deserve and are entitled to in a divorce, contact Branch Family Law today at 210-229-2088. We would be honored to be your advocate in and out of family court.

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