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Division of property and assets based on state and federal laws

Wednesday, July 18, 2018

Divorce is often a contentious affair, and finances are quite often among the most difficult issues faced by couples choosing to end their marriages. In Texas, assets and debts are divided according to community property laws, which means all assets accrued during the marriage are considered joint property and, therefore, the division of property and all other assets, including debts, is based on that assumption. This can pertain to assets individuals often overlook, including retirement savings.

There are a number of ways to access retirement savings in the course of a divorce. For example, a Qualified Domestic Relations Order can be used to bypass the usual fees and taxes levied on the early withdrawal from a 401(k). At this point, the assets contained in the fund can be divided and re-invested by individuals after the divorce is over. 

However, not all of these stipulations can be bypassed with a QDRO. Depending on the setup of one's retirement savings, money could still be taken from the total to pay for early access. Ideally, two former spouses can work together to make these determinations prior to approaching the settlement table, but of course this is not always possible. That is why seeking support for these issues can be of paramount importance for both parties. 

Divorce can be a complicated affair, especially when it comes to financial accounts like retirement savings. Texas residents need to understand that the division of property and other assets will affect their long-term financial situations. When both parties are educated on how state and federal laws will influence asset division, informed decisions can be made about how to proceed. 

Source: Time, "Who Gets Retirement Accounts in a Divorce?", AJ Smith, Nov. 16, 2015

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