How to allocate retirement accounts in a divorce

Anything that is acquired during a marriage is community property according to Texas law. This means that you will be entitled to roughly half of the value of a 401(k), an IRA or another retirement account that your spouse contributed to during the course of a relationship. An exception to this rule might be made if you signed a valid prenuptial, postnuptial or similar type of contract before divorce proceedings began.

Plans cannot be split without prior approval

Qualified retirement plans such as a 401(k) or 403(b) must be split per the terms of a qualified domestic relations order. A QDRO tells the plan administrator that a distribution is pursuant to a divorce, which means that the 10% early withdrawal penalty should not apply. Furthermore, it tells the administrator how much is being taken out of the account, where it should go and when the split will take place.

While an IRA cannot be divided until a divorce becomes official, there is no need for a QDRO. Instead, the divorce decree itself will specify that money is being taken out of the account pursuant to the end of a marriage.

An account can have multiple QDROs attached to it

It’s important to note that you may still be entitled to a portion of your spouse’s retirement savings even if he or she has been divorced in the past. In most cases, an existing QDRO will have little impact on how a qualified plan is allocated in your divorce proceeding. Your family law attorney may be able to answer any questions that you have about the property division process.

If you are going through the divorce process, it’s generally in your best interest to do so with the help of legal counsel. An attorney may help you take steps to protect your right to obtain joint assets. These steps might include engaging in a thorough discovery process, reviewing a prenuptial agreement or representing your interests in court if your case goes to trial.