The Love DuCote Law Firm LLC Legal Blog

How retirement accounts are divided in divorce

People in Texas tend to make financial decisions for the present and for the future. People need to budget for their current home purchases and mortgages, bills, food, clothes and other immediate needs, but also save money for future major purchases, future vacations or for retirement. There are different ways people save for these various needs, but for retirement there are a few common ways people save.

Many people have 401(k)s, Individual Retirement Accounts (IRA) or pensions. Each of these allow people to save for their retirements with tax deferred money, but there are differences between them. Because of these differences, if a couple gets divorced, how they are divided also varies.

401(k) and other Defined Contribution Plans

When people are dividing a 401(k), they can usually determine the exact value of the account fairly easily. There may be some disputes over whether there are separate portions in the account not subject to division, but people generally can determine the total value. When people divide the community portion of the account, they can state an exact value that the other spouse will receive. People will need a separate order to actually transfer the assets though called a Qualified Domestic Relations Order (QDRO), but the exact lump sum amount is usually rolled over into the spouse’s retirement account or cashed out.


Pensions are different because they are defined benefit plans and not defined contribution plans. Generally, people are only able to receive the benefit only after they retire, unlike a 401(k). It is also a defined monthly benefit as opposed to being able to withdraw as much or as little as they would like. So, dividing these is different because at the time of divorce the spouse with the pension may not retire until many years later. So, there are three main ways these are divided. One is by determining the present value and then paying the other spouse a lump sum from different assets. Another is to define the portion of the benefit the other spouse will receive after retirement. The third is to defer a decision on division until the spouse actually retires and begins receiving the benefit.


IRAs are similar to 401(k)s in that the value of the account is easy to determine, but they are different because they are not employee sponsored. Therefore, people do not need a QDRO to transfer assets out of these accounts to the other spouse.

People in Texas may have different types of retirement accounts and various amounts in those accounts. Determining the community portions and separate portions can be complicated though. How they are actually divided can be complicated as well and may need a QDRO to actually transfer assets. Experienced attorneys understand the complications associated with dividing retirement accounts and may be a useful resource.


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