Married couples typically invest a substantial amount of time and energy into planning for the future together. They save up to buy a home together and help one another handle financial obligations, such as student loans and credit cards.
They share the practical responsibilities and costs of raising children. They also combine their incomes to afford a more comfortable standard of living. That practice typically continues into the retirement years when spouses rely on Social Security benefits, pensions and retirement savings to cover their basic household expenses.
Divorce in Texas requires major financial adjustments, as spouses have to divide their property and debts. That process can have a profound impact on retirement resources. How can couples address retirement savings when dividing community property in a Texas divorce?
Dividing the account
The most straightforward means of applying community property laws to a retirement savings account is to divide the marital balance of the account. Whatever deposits people made to the account during the marriage are subject to division. Any savings from before the marriage may be the separate property of one spouse that they don’t have to divide.
After calculating the portion of the account subject to division, spouses can arrange to split the account. Community property rules may begin with an even division of assets, but uneven divisions are also sometimes necessary to create a fair outcome. One spouse does not necessarily have to demand half of the retirement savings account in order to receive their fair share of the overall marital estate. In fact, it is possible to address retirement savings without actually dividing them in a divorce.
Offsetting the value of savings
Once spouses have determined the marital portion of a retirement savings account, they can factor that into how they address other marital assets and debts. For example, one spouse might retain the entirety of their retirement savings account because they give up their interest in the equity of the marital home.
Other times, someone might keep the retirement savings account and also may take responsibility for a substantial portion of the marital debts as well. There are many different arrangements that spouses can negotiate or the courts can establish to help ensure the fair and appropriate division of marital property without actually splitting retirement savings.
Those who understand that the name on a retirement savings account does not determine who keeps it in a divorce can approach property division matters with realistic expectations. Addressing high-value assets, including retirement savings, is it important element of any Texas divorce.
