A variable annuity allows you to receive payments from an insurance company at some point in the future. The company that holds the annuity is responsible for investing the money inside of it until the first distribution is due. Under Texas law, the asset could be split into two separates policies in a divorce settlement. Alternatively, a portion of the annuity’s value will be divided between you and your spouse.
Determining ownership of the asset
As a general rule, the annuity will be considered joint property if it was acquired during the marriage. If the asset is split into two new annuities, you will take ownership of one policy while your spouse will take ownership of the other. Typically, you assume ownership rights to the new annuity as soon as it is created. This allows you the opportunity to determine how investments are made as well as the ability to name a beneficiary.
Don’t forget about tax implications
If the annuity is part of a qualified retirement plan, it will need to be divided per the terms of a qualified domestic relations order, or QDRO. The QDRO is a court order that allows the insurance company to transfer part of the asset’s value to another person per the terms of a divorce decree.
If the order is not issued, the insurance company may not make the transfer, or you could incur income taxes and other fees. Generally speaking, a court order will also be necessary before a variable annuity that is not part of a qualified plan can be divided.
A family law attorney may help you obtain a portion of a variable annuity or other joint assets acquired during a marriage in a final settlement. Joint assets may include a home, a car or money inside of a bank or brokerage account. An attorney may also be able to negotiate for spousal support, child support or other resources that help you maintain a reasonable standard of living.