Splitting Retirement Accounts in Divorce Can Become Contentious

divorce

An important component of every divorce is the division of marital property. When retirement accounts are part of this process, the issue can be exceedingly complicated, and because these accounts tend to have considerable value and because they are subject to more complicated taxes and regulations, the issue can become contentious. Better understanding the basics can help ensure that you protect your rights throughout the divorce process.

The Division of Marital Property

In a Texas divorce, your marital property will be divided in a manner that is deemed just and right, which is tantamount to a manner that is fair under the given circumstances. This just and right division, however, does not necessarily mean that your marital property will be divided right down the middle.

QDROs

If your divorce involves the division of a 401(k) or another kind of pension, you will need to do so through a Qualified Domestic Relations Order (QDRO). This is a legal tool that allows one spouse’s pension to be divided between both divorcing spouses without incurring immense early withdrawal penalties in the form of fees and taxes. QDROs are highly technical, and if your division of marital property is leading in this direction, you will need the professional legal counsel of an experienced divorce attorney on your side.

Avoiding QDROs

Not every type of retirement account requires that you go through the legal process of a QDRO. Both traditional retirement accounts and IRAs can be divided between divorcing couples without the necessity of a QDRO, but early withdrawal penalties may apply. Because you do not want to lose a hefty percentage of your marital property to taxes, it is critical that you carefully explore all your options with a family law attorney who has considerable experience in the division of complicated assets.

Alternatives to the Division of Retirement Accounts

While retirement accounts are often among a couple’s most valuable assets, there are sometimes alternatives to dividing them directly. For example:

  • Often, a couple’s home is their greatest asset, and the spouse who retains the family home may offset the financial gain by relinquishing retirement accounts of similar value to the other spouse.
  • The spouse who retains a retirement account can buy out the other spouse’s share in that account – either over time or by retaining a loan and paying it off directly.

Every divorce is unique to the couple and the circumstances involved, but hammering out a division of retirement assets that bypasses financial penalties and that maximizes your return is in the best interest of your financial future.

Consult with an Experienced Attorney Today

The division of marital property is a critical component of every divorce. Brett Pritchard at The Law Office of Brett H. Pritchard in Killeen, Texas, is a dedicated family law attorney with the experience and resources to help ensure that your division of marital property protects your rights. Your case is important, so please do not hesitate to contact or call us at 254-501-4040 for more information today.







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