713-333-4430Pension Division of One Spouse in Divorce
Even with the most diligent preparation, unexpected disruptions can threaten one’s financial stability and the precious golden years ahead, threatening emergency and retirement savings. Divorce is one such trouble that can affect even the most hardworking individuals. Older adults dealing with divorce should especially confront separation head-on rather than avoid or delay it, as the stakes are too high. Divorce is a complex and often emotionally charged process involving dividing assets between spouses, including critical items such as one’s pension.
When divorce is on the table, a proactive approach is best, beginning with asking the right questions and informing yourself of what steps to take. Here we delve into the intricacies of dividing a pension during a divorce and shed light on the key factors influencing this process.
Defining a Pension
Before uncovering the details involved with the pension division, it’s important to define what a pension is in the state of Texas. A pension is a retirement benefit provided by your employer as part of their compensation package. In Texas, a pension is a source of income during retirement, often accumulated over years of service with a company or organization. However, is a pension yours or something you share with your spouse, even in divorce?
Texas：A Community Property State
To understand if your pension is properly allocated, you must understand the state’s approach to dividing property. Texas is a “community property” state, which implies that all assets and debts obtained throughout the marriage are perceived as jointly owned by both partners. Consequently, in the absence of a valid prenuptial or postnuptial agreement, the pension earned during the marriage is typically eligible for division.
Note: Items such as 401k’s, IRA account holdings, and similar investment and retirement plan efforts are also eligible for such divisions. There are some exceptions to division; however, a skilled Texas marital property division attorney is best suited to assist with determinations.
Determining the Marital Portion
When going through a divorce and dividing a pension, it’s vital first to distinguish the amount of the pension earned within the timeline of the marriage, also known as the community property portion. The matrimonial part includes contributions and benefits earned during the marriage. In contrast, any contributions or benefits that were acquired before or earned after the marriage are usually considered separate property and may not be eligible for division.
After the determination of the community property portion, the division process takes place between the two parties. The specific division method, whether through a lump-sum payment, periodic payments, offset, or deferred division, depends on the case’s unique circumstances and the spouses’ preferences.
If you’re grappling with the complexities of divvying up a pension in a divorce, it’s wise to seek the counsel of a marital property division lawyer specializing in retirement benefits. A lawyer can help you sift through the required paperwork, collaborate with financial experts to assess the pension’s value, and work to secure a just distribution that safeguards your interests. In some instances, you may opt to exchange or trade items of community property equally. Still, again this requires a clear and true evaluation of all marital property to ensure the exchange of one portion of an asset, such as half a pension, is equivalent to half of another item you would be receiving.
Dividing the Pension
Once the community property portion of the pension has been assessed and valued, the next course of action is to allocate it between the spouses. Texas offers several alternatives for dividing pensions, including:
Lump-Sum Payment: In certain situations, both parties may come to an agreement, or the court may decree a one-time payment of the pension’s current value to one spouse. This choice provides a clear-cut separation, enabling the other spouse to receive their portion of the pension upfront.
Exchange or Offset: Compensating one spouse for their share of a pension through an offset involves allocating other marital assets or property of equal value. For instance, if one spouse is entitled to 50% of the pension’s present value, they may receive additional property or assets worth an equivalent amount.
Deferred Division: An alternative is to postpone splitting the pension until the spouse who earned it or the employed spouse is qualified to collect the benefits. At that moment, the non-employee spouse would receive their assigned portion of the pension directly.
What stops my spouse from emptying their pension or other retirement account?
Upon filing for divorce in many Texas counties, automatic standing orders are typically issued prohibiting either party from withdrawing funds from their respective retirement accounts. However, in lieu of automated orders, should your county not have them, you can request temporary restraining orders, preventing your spouse from taking actions such as emptying retirement accounts or cashing in a pension prior to finalizing the divorce. Should they attempt to go against the order, they could face repercussions with the court.
Qualified Domestic Relations Order:
When it comes to dividing and enforcing a pension, a Qualified Domestic Relations Order (QDRO) often comes into play. QDRO is a court order crucial in directing the pension plan administrator on distributing benefits between spouses. The QDRO outlines important details, such as the allocated percentage or dollar amount, the time frame, and other essential factors. A QDRO is another respect in which working with a qualified community property division attorney with appropriate experience is vital to ensure a legally binding and accurate order is drafted.
Secure Your Future With A Marital Property Division Lawyer
Moving forward in a divorce involving assets you’ve worked nearly a lifetime to obtain, you must exercise the utmost caution and seek seasoned and trusted advice to ensure those assets are guarded and divided fairly. Aside from the elaborate nature of the average divorce, those involving pensions come with the significance of understanding the process of dividing a pension, including determining the community property portion, valuing the pension, and exploring various division options, which are only some of the crucial steps involved for achieving a satisfactory settlement. Contact an experienced Houston community property division lawyer to schedule a confidential consultation to secure your financial future as you embark on a new chapter of your life.
Attorney Kevin Hunter at Boudreaux Hunter & Associates, LLC has experience with child custody, spousal support, high conflict divorce, and is fully equipped to guide you through the process. Learn more about Kevin on his profile here.
