Divorce is more than terminating a marital relationship. When you decide to end your Texas marriage, you also have to divide your joint assets and debts. When it comes to retirement accounts, this could get complicated.
Dividing employer-sponsored retirement accounts
In order to withdraw money from an employer-sponsored retirement account like a pension, 401(k) or 403(b) plan, you’ll need a qualified domestic relations order. This document orders the plan administrator to allow the other party to receive funds without penalty to the participant.
Dividing individual retirement accounts
You won’t need a qualified domestic relations order to split your or your spouse’s individual retirement accounts, but there are some things you should know if you or your spouse has one or more IRAs:
- Inherited accounts are considered separate property
- Funds added to an account before marriage are separate property
- Accounts that were opened and funded during the marriage are typically marital property
It’s also important to consider the federal income tax implications of splitting an individual retirement account. As long as the funds are transferred to another IRA, the transfer may be done without any income tax consequences. However, if you need the money for living expenses, you might have to pay taxes on the amount you receive.
There are several things to consider when dividing assets as part of a divorce. It can be very important to meet with an experienced family law attorney to discuss all of the things that can arise during and after the property division process.