What You Need to Know About Pension Division During Divorce in Texas

During a divorce in the state of Texas, many individuals are unaware that their retirement or pension accounts may be divided. Here’s everything you need to know about whether pensions are divided during divorce in Texas.

Other than homes, some of the largest assets divided during a Texas divorce are retirement accounts. While many divorcing spouses may be surprised to discover that pensions are subject to division in Texas, they are nonetheless important given the significant amount of money that may be associated with these pensions.

Texas is a Community Property State

Texas is a community property state as opposed to an equitable distribution state. This means under Texas law, everything a spouse acquires during their marriage is considered community property and is subject to property division during a divorce. Each spouse has an equal share in community property, which may include the earnings of both spouses and any debt accumulated by either spouse during the marriage.

Under Texas law, all income earned during the time a couple is married is deemed community property unless proven otherwise. This includes any money either spouse contributed to an IRA or 401K or earned as pension benefits. Retirement accounts that may be subject to division during the divorce process in Texas include:

  • Pensions
  • Deferred compensation accounts
  • 401(k) accounts
  • Individual Retirement Accounts (IRAs)

Related: Divorce Mediation in Texas: The Ultimate Guide

Determining Whether Pensions are Community Property in Texas

Unlike bank accounts or real estate, pensions can only be in one person’s name. Although pension accounts can only have one named account holder, any money deposited into the pension during a marriage is considered community property, regardless of which spouse actually earned the money.

In many cases, one or both spouses will have retirement accounts that existed prior to the marriage, which may be considered separate property. Separate property is not divided between the spouses. While any money deposited in a retirement account prior to the marriage is separate property, the process of dividing pensions in divorce is complicated, due to factors such as interest and fluctuation in the value of accounts.

Most retirement accounts, including pensions, may be divided by the court regardless of the length of the marriage. Additionally, there is no obligation for the court to split the balance of the account or accounts evenly between the spouses.

Division of Pensions in a Texas Divorce

In some cases, like with 401(k) or Roth IRA accounts, the process of splitting retirement funds is straightforward. Once it is determined how much each spouse accrued during the marriage, the courts include that amount in the various assets they divide.

Related: Texas Divorce FAQs

Pensions tend to be more complicated. The court may order that each payment from the pension fund get split between both spouses. In other cases, the courts may allow one spouse to retain the full pension by awarding assets of comparable value to the other spouse in the property division process.

FAQs About Pension Division During Divorce in Texas

Will I lose half my pension during a divorce in Texas?

Not necessarily. It is possible to divide marital assets in a way that would allow a spouse to keep their entire pension in exchange for their spouse getting other property of the same value.

How are pensions usually calculated during a divorce?

There are two basic ways to treat a pension in a divorce: either both spouses can agree to share the monthly annuity payments (or lump-sum payment) during retirement, or they can divide the present value of the pension at the time of the divorce.

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