Establishing your rights to retirement accounts during a Texas divorce

Other than homes, some of the largest assets that typically need to be divided during a Texas divorce are retirement accounts. While many divorcing spouses may be surprised to discover that retirement accounts are subject to division in Texas - especially since many of these accounts may not even pay out funds for several years - they are nonetheless important given the enormous amount of money in many of these accounts.

Dividing retirement accounts in Texas

Texas law expressly states that in all divorce decrees the court shall "determine the rights of both spouses" in retirement accounts, which can include pensions, IRAs or even 401(k)s. However, even though Texas code explicitly permits the division of retirement benefits, it does not explain how courts are supposed to calculate the division.

Consequently, Texas courts have developed a formula to help with the issue of retirement account division. This formula compels the court to determine:

  • The value of the retirement benefits.
  • The portion of that value which is "community value."
  • And, the percentage of that community property that each spouse is entitled to as part of a fair and just division.

Importantly, under Texas law retirement benefits earned by either spouse during the marriage are part of the community estate, and therefore are subject to division upon divorce. Thus, a divorcing spouse does not have to be the one that actually put money into the retirement account in order to have a right to its eventual proceeds.

The amount subject to division may be limited to the portion of the account that was accumulated during the marriage. For instance, private retirement or pension benefits earned by one of the spouses before the marriage, or after a divorce, are not considered community property, and as a result, are not subject to division.

In the case of an ex-spouse who seeks a portion of retirement accounts that he or she did not personally contribute to, a qualified domestic relations order (QDRO) is very important. Essentially, a QDRO is a signed court order that compels a retirement plan administrator to pay the noncontributing spouse his or her share of retirement benefits - benefits that would otherwise only be paid to the contributing spouse. The QDRO sets out the guidelines for as to how the benefits need to be calculated and paid to each ex spouse.

However, there is no standard QDRO form that will work for all retirement plans, not to mention that some plans are not subject to QDRO provisions. Therefore, it is often best to seek the counsel of an experienced family law attorney if you are currently considering divorce. A skilled attorney can review your assets, assist in drafting the appropriate documentation and help ensure your rights in all assets are protected.