Retirement plans are often threatened during divorce, particularly if pensions and other retirement accounts are divided during the settlement. Because Texas is a community property state, assets are usually divided 50/50. However, there are ways to avoid dividing pensions and other retirement accounts during divorce negotiations.
If you planned ahead and included your retirement accounts in your prenup agreement with your spouse, you might be able to keep your accounts intact. While the amount that pensions and other retirement accounts accrued during the marriage would normally be considered marital property, a fairly negotiated prenup might have included a clause establishing retirement accounts as separate property.
If you did not include your retirement accounts in a prenup, you do not have to automatically lose half in the divorce negotiations. You might negotiate to keep your retirement accounts intact in exchange for another asset of equal value, such as the family home, or agree to keep retirement accounts intact if both spouses have pensions of comparable value.
What if you must divide the accounts?
There are certain things to keep in mind if you must divide your retirement accounts. These include:
- A QDRO, or qualified domestic relations order, is needed to divide funds during the divorce.
- Funds must be requested during the divorce, not later when you begin receiving payments from the retirement accounts.
- Pensions from the government and military follow different rules for division than private pensions and other accounts.
- There are tax implications for the division of retirement accounts if certain rules are not followed, such as rolling funds from the divided retirement plan into the other spouse’s IRA.
Protecting your retirement accounts during divorce should be a priority. Remember to become familiar with the rules of each of your accounts before you go into negotiations so that you can make decisions that protect your retirement plan.