Your Rights to Retirement Assets
Oct. 13, 2021
After spiking a bit in 2019, the divorce rate in Texas dropped to 2.1 divorces per 1,000 inhabitants in 2020. The figure a year earlier was 2.6. This contrasts with the nationwide rate of 2.9 divorces per 1,000 persons, as compiled by the Centers for Disease Control and Prevention (CDC).
Still, divorces in Texas can be complex. Texas is both a community property state and a “choice” divorce state. Community property means that all assets acquired during marriage are legally considered owned 50-50 between the spouses. Choice divorce means filing under “no fault” or “fault” rules—no fault requires only an assertion of incompatibility, while fault has to be based on the actions or non-actions of one spouse.
Many individuals considering divorce worry about the role retirement accounts play in the division of assets. Are they considered community property? The answer is a qualified yes. They are community property only from the date of marriage to the date of divorce. Everything before and after belongs to the spouse who accumulated the retirement funds.
If you’re considering divorce or have already been served papers in the Corpus Christi or Dallas-Fort Worth areas, and you’re wondering about how to deal with each spouse’s retirement accounts, contact The Torres Attorneys. We are family law attorneys experienced in every aspect of divorce, including asset and property division.
Community Property in Texas
Everything acquired by either spouse during the time of marriage is considered community property, with the exception of inheritance and gifts awarded to one spouse solely. Generally, everything acquired before a marriage by either party remains that person’s personal property.
Separate property can become “commingled,” which can present an additional challenge during divorce proceedings. Suppose one spouse owns a rental home before marriage, but after tying the knot, he or she relies on the new spouse to help maintain it, or even pay for repairs. In that case, the property can become commingled, with the new spouse being owed for his or her contributions should divorce occur.
Though community property carries a 50-50 connotation, a judge overseeing a divorce will try to achieve what is “just and right” in determining the division of assets. In other words, the judge will take into account several factors in trying to make an equitable, if not necessarily a 50-50, division. These factors include:
The earning power of each spouse and the disparity, if any
The health of each spouse
Which spouse has custody of the children
The education of each spouse
The future employability of each spouse
Fault in the breakup
How Retirement Assets Factor In
Retirement assets are essentially community property, granting each partner rights to the other partner’s retirement accumulations during the period of marriage, not before or after. After a divorce, how and when the other spouse gains access to the retirement assets depends on the type of plan.
In general, there are two types of retirement plans: defined contribution and defined benefit. Defined contribution plans are like your 401(k) at work. You contribute part of your earnings each month to the plan and when you retire, you have access to the funds to convert into an annuity or use however you please.
A defined benefit plan is employer-sponsored, promising a set dollar amount of monthly payments once you retire. The payments are determined by years of service, compensation at time of retirement, and other factors.
On top of these are Social Security payments, military retirement, and government pensions, which can still be subject to division but are governed by the entities sponsoring them.
Role of The Qualified Domestic Relations Order (QDRO)
As part of the divorce, the court will issue what is called a Qualified Domestic Relations Order (QDRO). The QDRO is an order to the retirement plan administrator or employer of your former spouse’s plan to cash out your share. If it is a defined benefit plan, the QDRO will specify a percentage of the spouse’s monthly retirement payment to be sent to the ex-spouse.
When it comes to Social Security, you must have been married for 10 years or longer to qualify, and the Social Security Administration will factor in your own Social Security benefits before deciding on the amount you’re eligible for. Military retirement benefits also have a different set of rules. Payment hinges on how long your spouse was in the military while you were married. The Uniformed Services Former Spouses’ Protection Act (USFSPA) sets forth the qualifications.
Experienced Attorneys Will Help You Fight for What’s Fair
As you can see, even though Texas is a community property state, the division of assets in a divorce is not always 50-50, but equitable in the eyes of the court. Of course, you can always work on a divorce agreement between you and your spouse that divides everything to please both parties. For instance, you may want to retain your retirement account, so you offer another asset of equal value in the settlement. You can then present your plan to the court.
As family law attorneys, we will be happy to counsel and advise you toward achieving a mutual divorce agreement. But if you do end up in court, The Torres Attorneys will be happy to stand by your side to advocate for your fair share. The Torres Attorneys serve clients throughout the Corpus Christi and Dallas-Fort Worth areas of Texas.