New Braunfels Retirement Asset Division Lawyer

Attorney for Retirement Accounts and Pensions in a High Net Worth Divorce in New Braunfels, TX

For many married couples, retirement savings are some of their most valuable assets. A spouse who has worked for 20 years may have a 401(k) balance or a pension, and they may plan to use these assets to meet their needs in the future. However, the other spouse may also have an ownership claim over these assets, and when dividing property during divorce, retirement benefits will need to be addressed.

In a high-asset divorce, dividing retirement accounts and pensions can become some of the most complicated parts of a case. Each type of plan follows its own rules, and a mistake in how an account is divided can trigger taxes and penalties that could reduce the amount that each spouse will receive. At Hill Family Law, our lawyer can help clients protect the savings they have spent years building. He will work to secure a person's financial future after a divorce is complete.

Retirement Assets in a Texas Divorce

Our attorney can help clients address retirement benefits such as:

• 401(k) and 403(b) Plans: Employer-sponsored accounts funded through payroll contributions, often with an employer match.
• 457(b) Plans: Deferred savings plans offered to many government workers, including city and county employees.
• Traditional and Roth IRAs: Individual retirement accounts that a spouse opens and funds personally, sometimes through rollovers from former employers.
• Private Pensions: Defined benefit plans that promise a monthly payment after retirement based on a person's salary and years of service.
• Public Pensions: Benefits through systems such as the Teacher Retirement System of Texas, the Employees Retirement System of Texas, or the Texas Municipal Retirement System.
• Military Retirement: Benefits earned by service members.
• Executive Benefits: Nonqualified deferred compensation plans, stock options, restricted stock units, and supplemental executive retirement plans.

When Retirement Funds Must Be Divided

Not every dollar in a retirement account may be divided in a divorce. Only the community portion of retirement benefits, including contributions and growth earned during the marriage, will be divided between spouses. Money a spouse saved before the couple's wedding, along with the investment gains on that money, will generally be considered that spouse's separate property, as long as it can be traced to a pre-marital source.

The division of retirement assets may not necessarily be equal. A couple may agree that one spouse will keep an entire 401(k), while the other may keep more equity in their home or a larger share of another account. Our attorney can help clients carefully compare values of accounts and consider future income taxes before agreeing on a settlement.

Dividing 401(k) Accounts Without Tax Penalties

Employer-sponsored retirement plans that are governed by the federal Employee Retirement Income Security Act can be divided through a qualified domestic relations order (QDRO). This will allow the administrator of a plan to transfer funds from an account into a separate account in the name of the other spouse. The spouse can then roll the funds into their own IRA with no tax owed at the time of transfer. This will allow funds to be transferred out of an account without paying an early withdrawal penalty. If a QDRO is not used, a 10 percent penalty may apply when funds are withdrawn before the account holder reaches the age of 59½.

Dividing IRAs the Right Way

While IRAs may be similar to 401(k) accounts, QDROs are not used to transfer funds. Instead, a tax-free "transfer incident to divorce" will be allowed when a transfer is made based on the terms of a divorce decree. Taxes or penalties will not apply if the funds are transferred from the account owner's IRA into an IRA in the other spouse's name.

How Pensions Are Divided

Pensions can present a unique challenge during a divorce, because the benefit is a promise of future monthly income rather than an account balance. In some cases, an actuary may calculate the value of the community share of the pension, and the employee spouse will keep the entire pension, while the other spouse will receive other property of equal value.

In other cases, the non-employee spouse may receive a percentage of future pension benefits. This percentage is usually calculated based on the employee spouse's years of service during the couple's marriage. A divorce decree may also address survivor benefits, which may allow a spouse to continue receiving payments after the death of the employee spouse.

Contact Our New Braunfels, Texas Retirement Asset Division Attorney

Retirement savings will often need to be handled carefully during a divorce. Determining the right division method and the portion of different benefits that will be allocated to each spouse may require complex calculations and a consideration of a person's future needs. The right orders will need to be used to avoid losing money to taxes, penalties, or other issues.

At Hill Family Law, our attorney has the experience needed to address these issues correctly. He can help clients divide their marital assets correctly while protecting their financial interests and making sure they will have the resources they need in the future. Contact our New Braunfels, TX retirement benefits division lawyer at 830-229-2129 to set up a free consultation.