Divorce will bring significant financial changes for both spouses, and it will likely require both parties to make some adjustments in lifestyle and future expectations. This is particularly true for retirement accounts. It may be prudent for a person facing the prospect of divorce to understand how the property division process works and what it could mean for his or her retirement plans.
When a Texas couples divorces, they will have to divide all marital property. This includes retirement savings accumulated over the course of the marriage, which can be a substantial amount if the couple was married for a long time. A person interested in protecting his or her interests in divorce will need to know what types of accounts are subject to division, their classifications and how money is paid out from those accounts.
Whether a couple agrees on the terms of property division or a court will decide, there are specific rules in place that determine how retirement assets are addressed. Most are either qualified or nonqualifed. Qualified are often tax-deferred accounts, such as a 401(k). It takes a specific type of court order, Qualified Domestic Relations Order, to split these accounts properly and pay a portion to someone else.
Dividing retirement accounts in a Texas divorce can be especially complex and confusing. It may be beneficial for a person to seek an explanation of his or her rights regarding property division before agreeing to any terms. A fair division of all types of long-term savings is crucial to a person's financial security and stability in the future.