When a divorce in Texas involves a couple with a retirement plan, the splitting of assets could create tax consequences. In addition to legal guidance, a person getting a divorce might want advice from a financial planner before agreeing to a property division agreement.
A class of planners known as certified divorce financial analysts help people understand the possible long-term consequences of financial decisions made during the divorce process. Consider the scenario in which a divorcing couple agrees that the ex-wife should get the home valued at $200,000 while the ex-husband should keep the 401(k) account that has $225,000. Although it appears that the husband is getting the better half of the deal, a CDFA could inform him about taxes and penalties that could result after the distribution of funds. For example, if he is younger than 59 and a half, a 10 percent penalty could be owed along with income taxes. This information might cause him to change his earlier decision.
Once both parties have decided how to treat retirement assets, an attorney will prepare a Qualified Domestic Relations Order that details how to divide the funds. The QDRO represents a court order, and the retirement plan administrator will disburse the funds according to the directions on the document. The money can be applied to other aspects of the settlement, including child support or spousal support.
Every divorce presents unique financial situations, and an attorney could help a person consider legal rights pertaining to pensions, business assets or debts. In a contentious case, an attorney could collect documentation that supports the client's claims to certain assets. This information could be presented during negotiations or in court if talks between the former spouses break down. Once a settlement emerges, the attorney could explain how to comply with the court order.