When Texas residents who have retirement accounts divorce, they should expect that they will be required to divide those accounts with their spouses, regardless of who contributed the money. As a community property state, Texas views the account balances accumulated during the marriage to be the property of both spouses, and it will thus need to be divided.
There are different types of documents that must be filed with the plans depending on the type of retirement account it is. One of the most common is the Qualified Domestic Relations Order, or QDRO. This document directs the plan administrator of 401(k) accounts, employer-sponsored plans and pensions to divide the amount and give the owed spouse their portion. If the retirement account is an individual retirement account, then a transfer incident form will be used. Using the correct forms is important as they then prevent taxes and penalties for the early withdrawals.
If a person has more than one account, each one will needs its own filed document. Spouses are also allowed to negotiate how their assets will be divided, and if they come to an agreement, then the court will adopt the agreement as its order for the division of retirement assets.
Property division is often one of the most hotly contested aspects of a divorce. People who stand to have their retirement accounts divided may want to get help from a family law attorney. An attorney may be able to negotiate an agreement with the other spouse in which their client agrees to pay spousal support of a greater amount or agrees to give up other types of assets in exchange for protecting their retirement account balances. People need to approach property division with an eye towards their financial future and their ability to retire and not get mired in conflict.