Divorce can be a very stressful time in a person’s life. Not only are they losing a relationship they once loved, but a financial shakeup is almost guaranteed to happen. This is especially true for older Texas citizens who have a substantial amount of funds within their retirement accounts. The following includes further information on how retirement accounts are divided in a Texas divorce.
Dividing accounts in Texas
According to Texas law, the courts can “determine the rights of both spouses” when it comes to retirement accounts. These would include accounts such as 401(k), IRA and pensions, to name a few. The issue here is that although the state of Texas does allow division of these accounts during a divorce, there is no set procedure to determine how much each person receives. Fortunately, Texas courts have come to an agreement on how to fix that issue. They will take the following into consideration:
- The overall value of the retirement benefits
- Community value of the overall amount
- Portion of that value that each person is entitled according to the law
- Avoiding government fees
If you’re ordered to split your 401(k) plan and pensions, it is in your best interest to obtain a qualified domestic relations order, or QDRO. This form will allow you to bypass the high fees that the government charges for individuals looking to take out or transfer funds from their retirement accounts.
What are your options?
Understandably, some people will not want to even touch their 401(k) or pension accounts in fear of losing potential earnings. Fortunately, there are other options at your disposal. For example, once a concrete number has been presented to you regarding the value, you may seek to simply give your former spouse an asset that has an equal or greater value in exchange. However, they do not have to accept your proposal, so you must be ready for a rejection or counter offer.
Like any legal proceeding, it is critical that you obtain the services of an attorney to represent your interests during the divorce. Failure to do so might lead to you giving up more of your retirement accounts and thus placing you at greater financial risk once the divorce is complete.