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Who keeps retirement accounts during a Texas divorce?

On Behalf of | Mar 30, 2024 | Family Law

It is perfectly normal for someone facing a divorce to worry about their financial future. Most of their long-term financial plans probably involved the combination of their income and their spouse’s income. They know they have to pay for the divorce process and then divide their resources in compliance with the Texas community property statute.

Especially when people are relatively close to retirement age, they may worry about what might happen with retirement accounts or pensions during divorce proceedings. Even certain government benefits, like Social Security retirement benefits and Medicare, can be a source of anxiety.

Who typically keeps pensions and retirement savings when couples divorce in Texas?

Contributions might be marital property

Some people go into a marriage with a pre-existing marital contract. They have already agreed that each spouse should keep their own retirement accounts if they divorce. Other spouses have to address those resources during the divorce process.

People often have incorrect assumptions about what happens to retirement savings in a divorce. For example, they might assume that the spouse with their name on the account or the person working the job with pension benefits should keep all of those resources. Especially if someone started their retirement savings account or their job before getting married, they may mistakenly believe that retirement resources are their separate property.

Typically, any deposits or contributions made during the marriage our potentially subject to division when the couple divorces. Employer matching amounts and even interest accrued on retirement resources can be part of the marital estate. The spouses either need to divide the marital portion of the retirement account or find ways to offset the value of the retirement savings with other property.

People can usually avoid taxes and early withdrawal penalties by drafting a qualified domestic relations order (QDRO) when they must actually divide the account. They can also potentially arrange to retain the entire account in some cases if they reach agreements with their spouses. Dependent or lower-earning spouses can also potentially qualify for Social Security retirement or Medicare benefits if the marriage lasted at least 10 years.

Spouses who understand what to expect during asset division as part of a Texas divorce may find it easier to rebuild their lives after the end of a marriage. Seeking legal guidance is a good way to get started.