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Dividing retirement accounts in a divorce in Texas

Texas courts view any contribution you made to your retirement accounts as marital property, and therefore, they are subject to division upon marriage dissolution. Read on to find out how the judge will likely split your 401(k)s, IRAs, Roth IRAs and pension accounts.

Divorce in Texas

It doesn’t matter who contributed the money to the retirement accounts; upon divorce, your partner is entitled to that money as much as you are. But first, the court will determine which part of that money is marital and which is separate. Then they will divide it in a just and right manner, depending on your relationship.

Separate and marital retirement accounts

If you made contributions to your retirement accounts before you married your partner, the court would consider that part separate property. Therefore, your spouse won’t have a claim to it.

On the other hand, any contributions you made while you were married are marital property and must be split equitably between you and your ex. So, if you opened your retirements accounts before your marriage, the first initial payments won’t be counted as marital property; however, the succeeding contributions after your official marriage becomes marital property.

Splitting retirement accounts

The first step to splitting retirement accounts is determining their exact value at the date of divorce. Here, the court will consider all the monies that accumulated during the time you were married up to the moment you are officially divorcing each other. The court will then determine how best to divide what you have.

You can either go about your division in two ways:

  • You can cash out and divide the monies.
  • You can transfer part of your monies to your partner’s retirement accounts.

Many divorcing couples prefer transferring part of their monies to their partner’s retirement account so as to avoid heavy state and federal taxes. You can divide retirement plans provided by your employer, like pensions and 401K, without any tax penalties from the government.

IRAs are much more complicated. In order to avoid heavy tax penalties, the divorce decree must explicitly state that this is the path you are taking, with the exact amount you are transferring, and then send it to an IRA administrator.