Dividing property during a divorce can be complicated—especially when it comes to retirement accounts. Pensions, 401(k)s, IRAs, and other retirement assets are often among the most valuable items in a marital estate. In Texas, these accounts are subject to the state’s community property rules, which means they may need to be divided between spouses.
At Haugen Law Firm, P.C. we help clients throughout Denton County, Collin County, Cooke County, Dallas County, and Tarrant County protect their interests and ensure retirement assets are divided fairly and in accordance with Texas law.
Are Retirement Accounts Community or Separate Property?
In Texas, any portion of a retirement account earned during the marriage is generally considered community property, regardless of whose name is on the account. This applies to:
- 401(k)s
- IRAs
- Pensions
- Military and government retirement plans
- Deferred compensation plans
Retirement contributions made before the marriage are typically considered separate property and are not subject to division—but accurate documentation is key to proving what’s separate.
How Are Retirement Accounts Divided in Texas?
Texas courts aim to divide community property in a way that is "just and right", which may or may not mean a 50/50 split. The division of retirement accounts can be handled in a few different ways:
- Equal Division – Each spouse receives 50% of the community portion.
- Offsetting Assets – One spouse keeps the full retirement account while the other receives more of another asset (like the home or cash).
- Qualified Domestic Relations Order (QDRO) – A court order that allows the retirement plan administrator to divide a 401(k) or pension without triggering early withdrawal penalties or taxes.
Not all retirement accounts require a QDRO. For example, IRAs do not—but dividing them still must be done carefully to avoid tax consequences.
What Is a QDRO and Why Is It Important?
A Qualified Domestic Relations Order (QDRO) is a legal order that directs a retirement plan to pay a portion of benefits to the non-employee spouse. It must:
- Be approved by the court
- Be accepted by the plan administrator
- Clearly specify the amount or percentage each party will receive
Without a QDRO, dividing a 401(k) or pension could result in tax penalties and delays in receiving the funds.
Key Factors Courts Consider
When dividing retirement assets, the court may consider:
- Length of the marriage
- When contributions were made
- Each spouse’s age and earning capacity
- Fault in the breakup of the marriage (if applicable)
- Other assets available for division
In some cases, the court may award a larger share of the retirement assets to one spouse, especially if the other is receiving more property or assuming more debt.
Timing Matters
Even if a spouse hasn’t started receiving retirement benefits yet, the account can still be divided now, with the non-employee spouse receiving their share when the benefits become payable. This is especially common with pensions and other defined benefit plans.
Avoid Common Mistakes
Failing to properly value the community portion of the account
Assuming that the account holder keeps the retirement assets
Not obtaining a QDRO when required
Ignoring potential tax implications of dividing certain accounts
Forgetting to update beneficiary designations after divorce
Work With a Trusted Family Law Attorney
Dividing retirement accounts can be legally and financially complex. At Haugen Law Firm, P.C. we understand the nuances of Texas community property law and work to ensure that your financial future is protected during divorce.
We’re proud to serve families and individuals across Denton, Collin, Cooke, Dallas, and Tarrant Counties with trusted legal guidance in family law, criminal defense, and estate planning. If you have questions about your legal rights or need personalized support, our dedicated team is here to help. Contact us today!