Sometimes people near or at retirement age come into my office and would like to know about what will happen to the assets that they have worked much of their lives to amass upon divorce. The answer to this question is of importance to more and more people in Texas and I thought this would be a good time to shed some light on the subject.
Texas is a Community Property State
The state of Texas considers all property acquired during marriage as community property and therefore belongs 100% to each spouse. Such property is subject to a "just and right" division upon dissolution of the marriage. When it comes to people nearing retirement age, regarding pensions and retirement accounts, the community property rule can can sometimes lead to hotly contested litigation and hard feelings over what exactly a "just and right" division is, especially since many times one spouse has spent a number of years or decades amassing the balance of the accounts in question. This can be further exasperated when not all of the funds in the retirement account or pension were deposited during the marriage and are considered by one spouse to be separate property. In such a case the spouse claiming separate property must overcome the presumption that the entire account is part of the community estate by clear and convincing evidence. This issue can be particularly complex and if this is the situation you are in then you should enlist the help of a qualified divorce attorney.
One of the benefits of certain retirement plans is that the government offers tax benefits for participating in them. Some may worry that any benefits gained by participating in a retirement plan will be lost if the plan must be divided in a divorce according to community property rules. This is not always the case when the retirement plan is divided using what is known as a qualified domestic relations order or QDRO. With defined contribution plans, such as 401(k) plans, a QDRO can help ensure that tax consequences are minimized as much as possible. Many times, when a distribution to a former spouse is made pursuant to a QDRO there will be little or no penalty.
Pensions can be a little tricky to divide because of the necessity of assigning a current cash value to a future benefit, and of course, the problem that arises if some of the funds were deposited into the account before marriage. Here, qualified domestic relations orders are commonly used. When the parties agree to a value of the pension plan then the court can award a lump sum payment or can choose to award payment to one spouse in the form of a shared payment at the time of payout. It sometimes happens that a court will not immediately decide the issue and take it up on a later date.
If you are facing a divorce which will include the possible division of a retirement account or pension then you should enlist the help of a attorney who is accustomed to dealing with these types of issues. If you are considering hiring an attorney then I suggest you read the following blog post "Should I Hire a Lawyer?" I also encourage you to call the Law Office of Chad Zubi and get a free case evaluation regarding your specific circumstances.
Tags: High Net Worth Divorce, Property Division, Divorce
Chad Zubi Houston Family and Criminal Law Attorney.