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The tool that helps you divide retirement accounts in a divorce

On Behalf of | Apr 29, 2021 | Divorce |

Disagreeing with your ex about how to split up your property is a common issue for divorcing spouses. The more valuable a particular item or account is, the more likely it is for you and your ex to disagree about what to do with it.

Businesses and real estate holdings often become the focal point of property division contention in a divorce, but other assets can also represent tens or hundreds of thousands of dollars. Retirement accounts and pensions can be among your most valuable personal holdings.

Unless you and your spouse took the time to create a prenuptial agreement about your retirement accounts, the chances are good that you will need to split at least some of the contributions made during your marriage. Thankfully, there is a tool that can help you do that without losing your retirement savings to penalties and fees.

A QDRO is a helpful tool for those splitting up a retirement account

Whether you agree to certain terms with your ex in an uncontested filing or let the courts set the terms for you through a litigated divorce, you will eventually have paperwork that explains the property division order in your divorce.

One of the attorneys helping with the divorce proceeding can then draft a Qualified Domestic Relations Order. A QDRO serves two purposes. First, after approval by a judge, it serves as the instrument that orders the person managing the retirement account to split some of it off into a second, separate account.

Secondly, a QDRO also creates a clear record that the division of the account is the result of a court order. Provided that the division and distribution process goes smoothly and in compliance with the QDRO, you typically won’t have to worry about the penalties typically associated with early withdrawal from a retirement account.

Spousal maintenance or alimony could also be a retirement tool

Although the Texas courts typically shy away from awarding permanent alimony or spousal maintenance, payments from one spouse to another can be a means of dividing a pension if there isn’t an account to actually split.

Looking at the structure of your retirement account or pension, the length of your marriage and any documents you executed with your spouse can help you strategize for the best way to handle your retirement account and other major assets in an upcoming divorce.