Texas is a community property state, and the Court will presume that any accounts in a party’s name at the time of divorce will be a part of the community estate.
If a party believes that all or a portion of their retirement benefits are separate property, that party will have the burden of proving that the retirement benefits in question were acquired prior to the marriage.
Whether all the funds in a retirement account are community property or only a portion, the community property account will need to be divided in a just and right division in the divorce. This account, along with all other property owned by the community estate, will be valued and included in the division of the entire estate.
FAQ: Is there a difference in how different types of retirement accounts are divided in a divorce?
Yes, there is a difference. The most common types of retirement accounts divided in a divorce are 401(k) accounts, Individual Retirement Accounts (“IRA”), and Pensions.
Despite which retirement account type is applicable to your case, the value of the account will be determined so that it can be included in the overall calculation of the value of the community estate.
While a 401(k) and IRA may be valued at the face value of the account, a Pension can be valued and divided at the time of divorce or divided based on the value at the time of retirement.
FAQ: Are there different instruments used to divide retirement accounts?
There are different instruments that may be used to divide retirement accounts.
In the case of a 401(k) or a Pension, a Qualified Domestic Relations Order (“QDRO”) will be necessary to divide. This is a specialized order that will allow your plan administrator to deduct a portion of your retirement account to award to your spouse (if necessary). Using the QDRO allows for the funds to be transferred into a separate retirement account in the name of your spouse and avoids the penalties of early withdrawals commonly associated with removing money from a retirement account.
Dividing an IRA does not require a QDRO. Instead, most financial institutions will have internal forms that can be used to make a transfer from one IRA to another retirement account in the receiving spouse’s name. A common way to get this accomplished is for the receiving spouse to open an IRA with the same financial institution and utilize the internal forms to get their portion of the IRA transferred into their own name?
FAQ: What role does the plan administration play in transferring retirement funds?
The Plan Administrator of will ensure that the transferring instruction, for example, a QDRO, complies with the rules of the plan and matches the agreed value of the transfer from your Final Decree of Divorce.
A Plan Administrator of a 401(k) will typically review the QDRO before it is signed by a judge and either approve of the QDRO or request necessary revisions to comply with the plan’s rules. Once approved, the QDRO can be submitted to the Court for the Judge’s Signature. That signed QDRO will then be utilized to make the necessary transfers.
If you have a divorce case that will involve dividing retirement benefits, and you feel you would benefit from legal representation, you may contact our office to schedule a consultation by calling 832-781-0320 today.
If a party believes that all or a portion of their retirement benefits are separate property, that party will have the burden of proving that the retirement benefits in question were acquired prior to the marriage.
Whether all the funds in a retirement account are community property or only a portion, the community property account will need to be divided in a just and right division in the divorce. This account, along with all other property owned by the community estate, will be valued and included in the division of the entire estate.
FAQ: Is there a difference in how different types of retirement accounts are divided in a divorce?
Yes, there is a difference. The most common types of retirement accounts divided in a divorce are 401(k) accounts, Individual Retirement Accounts (“IRA”), and Pensions.
Despite which retirement account type is applicable to your case, the value of the account will be determined so that it can be included in the overall calculation of the value of the community estate.
While a 401(k) and IRA may be valued at the face value of the account, a Pension can be valued and divided at the time of divorce or divided based on the value at the time of retirement.
FAQ: Are there different instruments used to divide retirement accounts?
There are different instruments that may be used to divide retirement accounts.
In the case of a 401(k) or a Pension, a Qualified Domestic Relations Order (“QDRO”) will be necessary to divide. This is a specialized order that will allow your plan administrator to deduct a portion of your retirement account to award to your spouse (if necessary). Using the QDRO allows for the funds to be transferred into a separate retirement account in the name of your spouse and avoids the penalties of early withdrawals commonly associated with removing money from a retirement account.
Dividing an IRA does not require a QDRO. Instead, most financial institutions will have internal forms that can be used to make a transfer from one IRA to another retirement account in the receiving spouse’s name. A common way to get this accomplished is for the receiving spouse to open an IRA with the same financial institution and utilize the internal forms to get their portion of the IRA transferred into their own name?
FAQ: What role does the plan administration play in transferring retirement funds?
The Plan Administrator of will ensure that the transferring instruction, for example, a QDRO, complies with the rules of the plan and matches the agreed value of the transfer from your Final Decree of Divorce.
A Plan Administrator of a 401(k) will typically review the QDRO before it is signed by a judge and either approve of the QDRO or request necessary revisions to comply with the plan’s rules. Once approved, the QDRO can be submitted to the Court for the Judge’s Signature. That signed QDRO will then be utilized to make the necessary transfers.
If you have a divorce case that will involve dividing retirement benefits, and you feel you would benefit from legal representation, you may contact our office to schedule a consultation by calling 832-781-0320 today.