When a couple makes the decision to end their marriage, there are many issues that they need to address. One of the most complex of those issues is the division of assets. Part of those assets often include retirement accounts, such as 401(k)s, IRAs, and pensions. These accounts can be a significant part of a couple's financial portfolio, and they can be particularly difficult to divide because of their tax implications and complex rules. The following information is a brief overview of how retirement accounts are addressed in divorce. For more detailed information, speak with an experienced divorce attorney.

Marital Estate

Under Texas family law, retirement accounts are considered marital property if they were acquired during the marriage. This means that they are subject to division in a divorce. However, the specific rules and procedures for dividing retirement accounts can vary depending on the type of account it is. Retirement accounts are different than regular savings and checking accounts and funds cannot just be withdrawn at any time.

Because of the regulations that are associated with retirement accounts, any division of the account between the spouses is done under court order. This order is referred to as a qualified domestic relations order (QDRO).

A person going through a divorce can end up taking quite a financial hit, even under Texas community property statutes. The state uses the community property standard – dividing assets 50/50 – when it comes to the division of assets in the marital estate. Now that you are divorcing, your financial canvas is half of what it was when you were married. This is why many people going through a divorce will consult with a divorce financial advisor.

What is a Divorce Financial Advisor?

You and your soon-to-be former spouse may have consulted with a financial advisor during your marriage, seeking out professional advice on how to get the best return on your investments.

While a divorce advisor does some of the same things, they go even further in understanding and navigating through the process of “decoupling” your assets, as well. They are well-versed in financial matters surrounding the division of assets, child support, and spousal support, as well as uncovering assets that one spouse may be hiding from the other. They will understand critical factors that need to be addressed during and after a divorce that a regular financial advisor may not be aware of.

One of the issues that a couple must address in their divorce is how the marital estate will be divided. The marital estate is made up of the couple’s assets, property, and debt. For many couples, one of the most expensive assets they have is the marital home, and coming up with an agreement on what should be done with the home can be difficult, especially if both spouses want the house.

Unless the couple agrees to sell the home and divide the profit, and regardless of which spouse ends up with the home, the issue of refinancing the mortgage will also need to be addressed.

Protecting Credit Scores

When one spouse is awarded the house in a divorce, the court order only addresses the property. It does not address the mortgage. In other words, even though the spouses sign a quit claim deed and only one of them will now legally own the home, both spouses' names will still remain on the mortgage. The only way to remove the now non-owner spouse is to refinance the mortgage in just the owner spouse’s name. Until this is done, the other spouse will be just as liable for the monthly mortgage payments.

Divorce can and often does have a substantial impact on a person’s life. There are so many changes that take place both during the divorce process and also once it is complete. It is also not uncommon for the couple to go into an adversarial mode with each other, even if they both agree that divorce is the best decision for their family.

The decision to divorce by either one or both spouses typically does not happen overnight. There is usually a period of time leading up to that decision where the couple struggles with difficulties in the marriage and may even question whether they should stay together. If you are struggling with that decision or suspect your spouse is, it is important to take the necessary steps to prepare for the day that one of you files that divorce petition in order to protect your marital and parental rights. The following is a suggested “divorce checklist” to make sure you have covered all bases.

Get Copies of All Financial Documents

Once a divorce petition has been filed, it is common for important financial documents for the couple’s assets to just “disappear.” This is why you should take copies of all these documents before anyone files. This includes current statements from all financial accounts you and your spouse have, including retirement accounts, stocks, bonds, property deeds, vehicle titles, income taxes, paystubs, and any other relevant documents.

Enterprising spouses often start up businesses together, finding interesting and unique ways to bring extra money into their family coffer. Sometimes this looks like a formal business establishment, and other times it might be gradually buying up real estate to rent out on platforms like AirBNB. Whatever the format, when it comes time to divorce, a couple’s business needs to be divided just like any other marital asset. 

Dividing a business can be very difficult, however, as spouses often disagree about how much of the business is marital vs. personal property or what the true value of the business is. In cases like this, make sure you have the help of an experienced business owners’ divorce attorney who can assist you in resolving these tricky issues. 

Can One of the Spouses Keep the Business in a Divorce? 

Texas law requires community property to be divided in a “just and right” manner, which usually means something close to 50/50. If one of the spouses owned the business before getting married and did not protect that business with a prenuptial agreement, it can be very difficult to determine how much of that business is community property rather than the personal property of the spouse who originally owned the business.