You worked hard at your job. You saved money from the day you started. Lucky for your – your company had a 401(k) or pension plan match program so that 4% you stashed away for retirement was really 8%.
You were responsibly planning for retirement and felt like you were well on your way to a financially secure retirement. Then your spouse filed for divorce. Now he or she wants you to hand over half of your retirement account.
That doesn’t seem fair. How can that be?
Texas Is A Community Property State
Let’s start with the basics – Texas is a community property state. Texas law creates a presumption that everything you and your spouse own at the time of divorce is community property that is subject to a just and right division.
This just and right division applies to retirement accounts regardless of whether it is a defined benefit plan (i.e. a pension) or a defined contribution plan (i.e. a 401(k).
All community property is subject to a just and right division during your divorce.
But You Started Contributing To Your Retirement Account Before You Were Married
In that case, assuming you also contributed during marriage, the retirement account would be a mix of separate and community property.
The good news is that Texas courts developed specific methods and formulas for determining what portion is community and what portion is separate property.
The bad news is that this is a complicated process that requires substantial documentation.
In this case, the community portion of the retirement account is subject to division but the separate portion is not subject to division in your divorce.
The Good News
What’s good for the goose is good for the gander. This means that your spouse’s retirement account is subject to these same issues.
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