During a divorce in the State of Texas, many individuals are unaware that their retirement or pension accounts may be divided. Pension and retirement accounts are assets under Texas law. As such, one spouse may be entitled to a portion of the pension or retirement account or accounts of the other spouse.
Retirement and Pension Accounts Are Often the Second Biggest Asset of Divorcing Couples
By and large, it’s certainly easy to understand why the marital home is often the biggest asset that must be addressed during a divorce. Without a doubt, retirement and pension accounts are generally the second biggest asset that must be addressed. Texas law explicitly states that during a divorce, it is the job of the court to “determine the rights of both spouses” for retirement accounts.
Examples of Retirement Accounts That May Be Divided During Divorce
Retirement accounts that may be subject to division during the divorce process include:
- Deferred compensation accounts
- 401(k) accounts
- Individual Retirement Accounts (IRAs)
This is not a total list of retirement accounts that may be affected by the divorce. If you’re involved in a divorce and have a retirement account not mentioned above, call the Law Office of Julie Johnson at 214-265-7630 to discuss the specifics related to your situation.
When May a Spouse Be Entitled to the Other Spouse’s Retirement or Pension Account?
As Texas is a community property state, there are certain considerations that may play a part in whether one spouse is entitled to at least some of the retirement or pension account. One of those considerations is when contributions to the account were made. If contributions were made to the retirement or pension account before the marriage took place, it may be considered separate property. Separate property is not divided between the spouses. It is generally awarded to the spouse to whom it belongs. If there is a retirement or pension account that had deposits after the date of marriage, it may be considered community property regardless of which spouse is named on the account and who made the deposits.
Most retirement accounts, including 401(k)s, may be divided by the court regardless of the length of the marriage. Additionally, there is no obligation for the court to split the balance of the account or accounts evenly between the spouses.
Certain Retirement and Pension Accounts Have Additional Rules
It’s important to note that certain types of retirement and pension accounts may have additional rules that determine whether it could or will be split between the spouses. The most commonly affected retirement and pension accounts that follow special obligations include Social Security benefits provided because of spousal status, certain types of pensions, and military retirement accounts. For example, for Social Security spousal benefits or military retirement to be split, the spouses must have been married for a minimum of ten years and meet other requirements.
Valuing Certain Retirement Accounts
During the divorce process, the value of the retirement accounts in question must be determined. It is important to note that certain retirement accounts, such as 401(s)s, are valued on the date of the divorce. This value is the fair market value. It is not the actual purchase price of the retirement account.
Is It Possible to Prevent a Spouse from Cashing Out a Retirement Account Before a Divorce Is Finalized?
In many Texas counties, a standing order automatically becomes effective once the divorce complaint is filed. This order forbids either spouse from withdrawing funds from or cashing out retirement accounts. For divorces filed in counties without the automatic standing order, your lawyer may petition for a temporary restraining order to put the same restriction in place. If the standing order or temporary order is violated, the violator may be held in contempt.
Retirement Accounts and Divorce Settlements
It’s often alarming for people to learn that their requirement accounts may be at least partially awarded to their spouse. Like other assets, who will receive certain retirement accounts (or part of what is in certain retirement accounts) may be determined by the spouses who go through the divorce settlement process. For example, you and your spouse may decide to keep your individual accounts. That is, retirement accounts in your own individual names. Another option is to exchange certain community property rights to equal the value of the share of retirement that your spouse may be entitled to receive.
Questions about Divorce and Retirement?
If you’re divorcing your spouse and you have questions about how the process may affect the retirement accounts, the Law Office of Julie Johnson at 214-265-7630. For more than two decades, we’ve helped our clients navigate the divorce process to help protect their interests and to get through the process.