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2 important steps when dividing your retirement accounts

There are many challenges in the Texas property division process during divorce. Couples often argue about the fairest way to divide their assets and even which property is subject to division.

Retirement accounts can often trigger emotional responses in people because they represent future financial stability and sometimes also years of commitment to a job. No one wants to lose their retirement savings, but they are frequently part of the property division process in a Texas divorce.

Community property laws require the appropriate division of any property acquired during the marriage and not protected by a marital agreement. If you have to divide your retirement savings in your upcoming divorce, there will be two crucial steps that you should take to protect yourself during that process.

1. Establish what is community property and what is separate

You may have made contributions to the same retirement account for most of your working life, and you may only have been married for part of your career. You can typically exclude your premarital contributions from division in the divorce, although interest and even employer contributions added to the account during your marriage are subject to division.

2. Have a lawyer draft the proper documents

Dividing a retirement account can lead to a penalty if you are not yet at retirement age. There will also be taxes that come due when you withdraw money from the account, which can quickly add up and diminish your retirement resources.

When you reach an agreement about dividing your retirement savings or a judge enters a property division order, one of the lawyers working on your divorce case can draft a qualified domestic relations order (QDRO) to help you avoid those taxes in penalties.