Pensions, Retirement Funds And Divorce
Any contributions to a retirement plan made during the marriage are viewed as community property by a Texas court and subject to division upon divorce. Marital retirement accounts are pensions, IRA, Roth IRAS and 401(k) accounts established during the marriage.
Assessing the value of retirement accounts is a complex process, particularly if an individual contributed to the account before the marriage, or if some assets accrued in the account while the couple lived in a common-law state.
It is always wise to retain the services of an experienced attorney who is familiar with the intricacies of division of property as it pertains to pensions, retirement funds and divorce. At the law firm of Lisa E. McKnight, P.C., in Dallas, Texas, attorney McKnight has assisted individuals in this area and across the full spectrum of divorce matters for more than 24 years.
A Dallas Divorce Lawyer Who Puts Your Best Interests First
Retirement plans are viewed by the Texas courts as indirect compensation to a spouse, which is actually an income, earned by the spouse during the marriage.
Since most retirement accounts are subject to steep early distribution penalties, an attorney must draft a qualifying domestic relations order (QDRO) and ask judges to incorporate it into the final divorce decree. A QDRO allows the parties to avoid paying early withdrawal penalty fees imposed by the federal government. Each party has the option of withdrawing the marital funds, pursuant to the divorce award, and transferring it into a separate retirement account.
In most instances, these are tax-deferred accounts, so no tax consequences are incurred by merely dividing a retirement account in a divorce. However, there may be tax consequences after a divorce if you withdraw funds from a 401(k) before you are retired.
Valuing Retirement Accounts
The courts value the retirement plan at the date of divorce, not the actual value of the actual retirement benefit. Thus, the value of the community interest in the retirement plan at the date of divorce is not the same as the actual value of the retirement benefit.
Also, a Texas court may consider a disproportionate allocation in accordance with unequal earning capacity between spouses, unequal wealth or parenting time.
Finances and future plans are impacted greatly by divorce. Our experienced Dallas family law attorney can help you minimize the impact that your divorce will have on your retirement plans. Contact us online or call 214-528-4191 to learn more.