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Determining retirement asset ownership in a divorce

Divorces can be complicated life-altering events for Texas residents that cover family issues ranging from the disposition of minor children to dividing marital assets, including retirement funds. Retirement fund ownership can be a complicated matter, but basically any money earned and contributed to the funds of either spouse during the effective dates of a marriage will be used in making the final determination. There are a few situations where exemptions are made, but they are unique cases.

Retirement funds as community assets

Just as with any business partner relationship, which is effectively what a marriage is in the view of the Texas legal system, the prior holdings before the day the union became legally official will be the starting point for counting assets to be divided. All earned income and acquired assets before the divorce is final are included in the total asset amount. In cases where both spouses have retirement accounts, they are combined and divided equally when all other property is assessed, with the disparity amount being applied to the lesser spouse’s property.

Reaching a settlement

The problem with including a retirement account in a marital asset division is that many times the funds are tied up in long-term annuities that will be substantially penalized if they are liquidated. This is an outcome that neither party rarely wants, and many times an agreement can be made that transfers the amount over time. In some instances, the primary retirement account holder can pay the other spouse a lump sum settlement and keep all assets as they continue to earn income after the divorce is final.

Many divorce attorneys will advise this is the best course of action, but it can also be used as a bargaining chip. The full weight of the law will be applied in property division litigation when a case goes to trial, which would also make it a public knowledge matter that could be avoided with a successful divorce mediation process.