DivorceEstate PlanningHow Are Retirement Benefits Divided During a Texas Divorce?

November 13, 2023

Divorce proceedings are hard enough, but going through your finances can easily add to your stress and anxiety. One of the common properties that spouses tend to have is retirement benefits. But how do retirement benefits get divided during divorce?

From the experienced Texas divorce attorneys at C.E. Borman, here’s what to know about retirement benefits in terms of your divorce.

Retirement Benefits in Texas

Retirement benefits are considered as property in Texas; therefore, they can be subject to a “just and right” division by the courts. They are considered indirect compensation to a spouse and classified as income earned by the spouse during the marriage.

Under Texas laws, contributions made to a retirement plan during the marriage are considered community property in Texas courts. And because they are regarded as community property, they can be subject to division in a divorce proceeding.

A retirement plan is where an employee will receive benefits once the employee reaches retirement age. If an employee decides to leave the company before he retires, the company returns the employee’s contributions. They also forfeit any company’s contributions.

If the spouse made the contributions before marriage, then the retirement benefits are considered separate property. But when the spouse makes contributions after the marriage, it is part of the spouses’ community property.

What are the different types of retirement benefit plans? 

There are a few types of retirement benefit plans in Texas that can make a difference in divorce proceedings:

  1. A Defined Benefit Plan is a retirement plan that is based on a person’s specified monthly income. It is, however, dependent on the contents located in a particular account.
  2. Military Reservist’s Retirement is based on a point system calculated on the number of months served. If the military service of the spouse started before the marriage, the points are considered separate property. The only points that will be regarded as part of the community property are acquired during the marriage.
  3. A Defined Contribution Plan is another common type of retirement benefit – such as a 401(k) or 403(b). In Texas, these plans are typically divided through a Qualified Domestic Relations Order, a court order that grants an alternate payee, usually the non-employee spouse, a legal right to a portion of the retirement benefits.
  4. Social Security benefits are not considered community property and are not subject to division during divorce proceedings. However, divorced spouses may be entitled to receive Social Security benefits based on their ex-spouse’s earnings record under certain conditions. To qualify, the marriage must have lasted for at least ten years, and the individual seeking benefits must be unmarried, among other criteria.

One of the things that you need to keep in mind is that the court would value the retirement plan at the time of the divorce – not the value of the actual retirement benefit. You should also take into account that the value of the retirement plan would no longer be part of the community property after the divorce.

Additionally, if the spouses move from state to state during the marriage, that changes things. Texas courts would interpret the retirement benefits based on the laws of the residence of the spouses at the time the benefit was accrued. If you happen to live in a common-law state, retirement plans will be considered separate property and therefore will not be subjected to the “just and right” division.

Contact C.E. Borman Divorce Lawyers Today

Divorce is undoubtedly a challenging experience, and the division of retirement benefits can add a layer of complexity to the process. Understanding how Texas community property laws apply to various types of retirement plans is crucial for both spouses involved. Seeking legal guidance can help navigate the intricate terrain of dividing retirement benefits and ensure a fair and equitable resolution for all parties. Contact C.E. Borman today to discuss your options.

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