During a divorce Texas couples need to divide the life they shared together during the marriage. For some couples this means determining who will have custody of their children and when the children will be in each parent’s care. However, every couple will need to divide the property that they acquired during the marriage. For some this can be a very complicated process depending on the amount and type of assets that they acquired during the marriage.
Couples going through a high asset divorce may need to use appraisers and other professionals to determine the value of their property. People also may own assets that will result in tax consequences for the spouse receiving the property that must be considered when dividing the asset. Also, there are some assets, such as retirement accounts that will actually require a separate order to actually divide them.
At the end of a divorce one spouse may be awarded a portion of the other spouse’s retirement account, like a 401(k), which is governed by federal laws known as ERISA. Despite there being a divorce order dividing the property, plan administrators cannot actually make the transfer unless there is an order known as a qualified domestic relations order (QDRO) ordering them to disburse a specific amount to the other spouse. QDROs must meet specific requirements in order to be valid though.
Through a QDRO the spouse receiving the retirement funds will also be able to avoid the early withdrawal penalties and it will not be taxed as income if the receiving spouse rolls the funds into their own separate retirement account.
Many divorcing couples in Texas have retirement accounts governed by ERISA. These include 401(k)s, pensions and other retirement accounts. These accounts can have significant amounts of money in them and can be a major part of the property division. It is important that these accounts are divided properly and also have valid QDROs so the receiving spouse actually receives the funds. Experienced attorneys understand these specific laws and may be a useful resource.