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QDRO and Texas divorce: Dividing pensions and retirement accounts

Texas residents who are currently going through a divorce may want to pay close attention to the property settlement portion of their divorce, especially if it involves their retirement or pension plans. With the divorce rates continuing to rise among older adults in this country, more and more people are finding their retirement accounts affected during a divorce. Even for those who are not close to the retirement age, some may find themselves affected, resulting in some loss of their savings during the property settlement.

Retirement accounts and similar plans normally make up a large portion of one’s net worth. As such, it is important to carefully address these items in any property settlement agreement. Dividing these types of retirement accounts can become complicated, potentially causing unexpected tax implications and poor decisions may have disastrous consequences.

Retirement accounts added to during a marriage are typically treated as joint property and thus are generally subject to property division. While most couples plan their retirement together, a divorce can abruptly upset those plans, which may require all retirement accounts and pension plans to be carefully scrutinized. State laws vary but they may impact how these accounts are divided. Any divorce settlement agreement should directly address exactly how the assets will be split and how the money should be transferred.

Dividing a pension plan can be even more difficult and requires a court-ordered Qualified Domestic Relations Order, or QDRO. This order instructs the administrator of the plan about how to pay the non-employee.

Ensuring a QDRO is properly prepared is a crucial step in the property division process of a Texas divorce. And it’s extremely important to know that the QDRO must be submitted to a pension plan before you finalize your divorce. While dividing these types of accounts can be a headache, it is normally worth the effort to achieve an equitable resolution that fairly covers all marital assets.

Source: Forbes, “How Divorcing Women Should Handle Retirement Accounts and Pension Plans,” Jeff Landers, June 13, 2012

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