While they have become less common over the last couple of decades, pension plans once represented the bulk of retirement income for many workers in Texas and across the United States. Unfortunately, these types of employer-sponsored plans can make for complicated divorce proceedings, as they can be difficult to evaluate accurately and even more difficult to split between both parties to a divorce.
Effective and knowledgeable legal counsel can make all the difference when it comes to dividing pension and retirement benefits in an Austin divorce. A qualified property division attorney could walk you through how state law defines these kinds of assets, ensure a fair valuation of divisible benefits, and work tirelessly to protect your financial best interests from start to finish of your divorce.
Identifying Retirement Benefits
One of the first things to consider is which types of assets fall into retirement benefits. Some examples of retirement accounts include:
- 401K accounts
- Individual retirement accounts (IRA)
- Deferred compensation accounts
If parties have these accounts and go through a divorce many years before their retirement, these assets are still a part of the marital estate. This means that the individuals to a divorce in Austin must divide those retirement accounts as a part of the property division process.
When Are Retirement Benefits Divisible in a Divorce?
Much like retirement savings in 401k accounts, IRAs, and similar financial instruments, any pension plan benefits accrued between the moment a marriage began and the moment an ensuing divorce concludes may be considered as community property. Even if community property assets are solely in one spouse’s name, they still may be subject to equitable division by a court during divorce.
Importantly, many pension and retirement benefits cannot be divided through an Austin divorce unless certain prerequisite conditions are met. For instance, a party to a divorce is only eligible to receive Social Security Spousal Benefits based on their soon-to-be-former’s spouse’s qualification for Social Security Benefits if their marriage lasted for longer than 10 years.
Additionally, military retirement plans sometimes allow for spousal benefits, but the exact benefits available vary based on the amount of time the former servicemember in question spent in the service during their marriage. A dedicated attorney could offer further clarification on a case-by-case basis regarding whether certain benefits could be considered community property and what that might mean for the asset division process.
Enforcing the Prompt Division of Benefits
In the City of Austin, courts automatically impose standing orders once someone files a complaint for divorce, the purpose of which is to prevent either party to that divorce from moving, spending, or hiding potentially divisible assets. This order also applies to retirement funds, so any party to an Austin divorce who tries to withdraw retirement or pension benefits before they can be equitably divided could face contempt proceedings, which in turn could lead to serious civil and criminal penalties.
The process of actually receiving these kinds of benefits can be complex even with a court order, as pension accounts and similar financial instruments are managed by companies on behalf of individual employees rather than the employees themselves. Seasoned legal counsel could provide crucial assistance with pursuing a Qualified Domestic Relations Order and taking any other required legal action to compel a private employer to divest community property assets from a soon-to-be-former spouse’s retirement benefits.
Protecting Retirement Assets
In some cases, an individual might be able to maintain their own retirement accounts. One way is to offset the value with other assets. Other times, the parties may wish to cash out a share of retirement benefits to prevent the need to engage with that individual in the future when those benefits mature.
The options available in each case will depend on the complete marital estate. Individuals should remember the value of their retirement account that a spouse has the right to depends on the funds in that account at the date of the divorce. If the account continues to accrue value for years after the divorce, those funds belong to the account holder alone.
Dividing retirement accounts also requires that individuals complete a court order called a qualified domestic relations order. Dividing retirement accounts is complex, and individuals should discuss these issues in detail with an Austin divorce attorney.
Learn More About Dividing Pension and Retirement Benefits During Divorce from an Austin Attorney
Even in high-asset divorces, retirement savings and benefits often represent a significant amount of a married couple’s total divisible property. However, the fact that these benefits often play a significant role in the asset division process does not mean evaluating and dividing them is simple or straightforward in practice.
In light of the many complexities and complications that can crop up when dividing pension and retirement benefits in an Austin divorce, retaining an experienced high-asset divorce attorney is virtually essential for anyone who wants their divorce to proceed as smoothly as possible. Get started today.