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Division of retirement assets during divorce

| Dec 31, 2020 | Property Division |

Property division is a necessary part of divorce for Texas couples. One tricky part of property division is in the split of your retirement assets. The division of these assets leads to changes in your taxes, so you might have difficult decisions to make.

401(k)s

The most common retirement asset that requires property division after divorce is your 401(k). There is special documentation to complete, which is known as a qualified domestic relations order. Your spouse likely has a claim on your 401(k), so you can choose one of four options:

  • Exchange assets
  • Divide the funds evenly
  • Liquidate the funds
  • Roll the amount over into an IRA before the divorce

IRAs

The next retirement funding source that requires division is an IRA. Any IRA funds that existed prior to the marriage are only yours while funds added after the marriage will likely be split. Roth IRAs do have a different valuation after division due to the tax-free status of the account.

Annuities

Annuities provide complications when it comes to the consideration of property division between you and your spouse. The most common split involves the creation of a new contract for you and one for your spouse, withdrawing the previous contract. You may want to consult an accountant before making this decision to learn about the tax implications.

Professional help during the process

Divorce has many complications from the time of agreement to the final decree. This is why it is important to contact a lawyer as soon as possible to help you through the process. He or she may help you decide on the best possible division for you and your spouse.