If you’re going through a divorce, you’re probably wondering what happens to your retirement accounts. Are they considered marital assets, and will you have to split them with your spouse? Here’s what you need to know.
In Texas, marital assets are generally defined as property acquired during the marriage. This includes everything from the family home and investments to bank accounts. These assets are considered jointly owned, regardless of who earned them.
Retirement accounts like 401(k)s, IRAs and pensions are classified as marital assets if contributions were made during the marriage. For example, if you’ve been contributing to a 401(k) while married, the portion accumulated during the marriage is subject to division in a divorce. However, any contributions made before the marriage or after separation may be considered separate property and could remain yours alone.
Crucial considerations when dividing retirement accounts
Beyond just splitting the funds, it helps to understand the tax consequences and explore your options. For instance, you could face hefty taxes and penalties if you withdraw retirement funds early or transfer them incorrectly. A Qualified Domestic Relations Order (QDRO) is often used to avoid such outcomes, depending on your retirement plan.
You could also agree to offset assets rather than split a retirement account. For example, you may keep your 401(k) while your spouse gets an equivalent share of home equity or other marital assets.
Protect your financial interests during a divorce
Retirement accounts are meant to support you later in life, so you shouldn’t take chances with how they are split. If you brought a retirement account into the marriage, you’ll need clear documentation to show which funds are separate and which are marital. If not, it still helps to learn what goes into dividing these significant assets.
Reaching out for legal assistance can help you understand how the law works in Texas and the long-term impact of any decision. It can help protect your future retirement security while ensuring a fair divorce settlement.