When working couples divorce, they often assume each spouse gets to take their respective 401K accounts with them. Keeping your 401K in divorce isn’t necessarily what happens. Texas is a community property state and all income earned while a couple is married is generally to be divided equally. That includes money in a 401K or retirement savings account. Here’s what you need to know about 401K in divorce and how you may be able to keep your hard-earned nest egg.
How is a 401K divided in divorce?
Dividing a 401k in divorce can get complicated quickly. Because Texas is a community property state, all marital assets are to be divided 50/50. However, money invested in a 401K prior to marriage does not fall into the “marital asset” category. In other words, money invested in a 401K plan before the marriage is not considered community property, and therefore, not divided. A court must determine how much of the 401K was earned during the marriage and how much was earned separately. This is often a complicated undertaking, especially since interest accumulated by the plan is likely to be considered community property. It’s important to work with a skilled attorney during this process to make sure your rights are protected.
Is it possible to keep my 401K in divorce?
Yes, it’s possible. If each spouse’s 401K account contains roughly the same amount of savings, the court may not divide either and just award each party their own retirement. If there is only one retirement fund or if the two accounts have a disproportionate amount of savings, you may have to fight for it. Divorce courts have wide discretion in dividing up individual assets by applying the “just and right” standard. To show the court why you should be wholly awarded your 401K, be prepared to show your need for future support and the value of your spouse’s assets and income.
Can spouses agree to settle a 401K in divorce?
Yes, spouses are free to enter into settlement agreements to resolve issues, such as splitting retirement savings, during the divorce. For example, both spouses could agree that they will each retain their separate 401 accounts, or that one spouse can keep the 401K in exchange for another asset of equal value. It’s important to point out that a family court judge must agree to your joint decision. Still, settlement is often the way to go if it can be accomplished through the attorneys of each spouse or through mediation. Speak with a skilled family law attorney to find out how to settle your divorce fairly and amicably.
What is a QDRO?
A QDRO is an acronym for Qualified Domestic Relations Order. In simple terms, a QDRO is a signed court order that tells a retirement plan administrator how to distribute retirement benefits to each spouse. It is separate from a divorce decree and must comply with state and federal law.
Questions about 401K in Divorce? Speak to an experienced divorce lawyer
Retirement assets, such as a 401 K accounts, are often the largest assets in a marriage, and typically one of the most complex issues in a divorce. It can get contentious quickly when large amounts of money and retirement savings are involved. That’s why it’s extremely important to have a savvy divorce lawyer guide you through this process. We can help. The team at Varghese Summersett Family Law Group will work to ensure that your retirement benefits are accurately assessed and protect your rights. We have helped hundreds of people successfully navigate this difficult time and we can help you too. If you are facing or contemplating divorce, call 817-900-3220 to schedule a consultation with a skilled family law attorney today.
This content was originally published here.