If you are planning to divorce, one of the most important – and often contentious – aspects of the divorce process involves the division of marital assets and debts. If you have accumulated significant assets, there is a good chance that at least one retirement account will be among those assets. That means you will likely need to incorporate a Qualified Domestic Relations Order, or QDRO, into your divorce. Fort Worth divorce attorney Jon Boyd explains when and why a QDRO may be necessary in your divorce.
Texas is a “community property” state, meaning all the property that either spouse acquires during the marriage is considered marital property unless it qualifies as separate property. Most couples contribute funds to their retirement accounts during the course of a marriage, making the assets held in those accounts marital assets that must be divided upon divorce. When a pension or retirement account is subject to division in a divorce, a QDRO must be prepared. A QDRO is a court order granting one spouse a right to a portion of the retirement benefits of the other spouse that were earned through an employee retirement plan. Federal law requires a QDRO to be in place for an alternate payee to be added to the account if the employee benefit or pension plan is subject to the Employee Retirement Income Security Act (ERISA). Most private sector pension and retirement plans are subject to ERISA. The QDRO describes the accounts to be divided, the manner of division, and the name of the alternate or additional payee. To create a QDRO, you will need to know the formal name of the retirement/pension plan, the value of the plan and when that value was determined, and you will need to check with the plan administrator to make sure the plan will honor the QDRO once it is in place.
Because Texas is a community property state, the starting point for dividing pension or retirement accounts assets is a 50-50 split; however, a judge is not required to order an equal division of the assets. For example, if you contributed to the plan for a significant number of years prior to the marriage, dividing the assets equally would not produce a fair result. Moreover, the law will only consider the portion of the account that was earned after the marriage took place to be marital property subject to division.
By way of illustration, imagine that you began contributing to a pension or retirement account at age 25 but did not marry your current spouse until age 40. During the intervening 15 years, you managed to accumulate $100,000 in your retirement account prior to marriage. Now, 15 years after your marriage, you have an account valued at $300,000. The $100,000 that you accumulated prior to your marriage would qualify as your own separate property, leaving $200,000 potentially subject to division. The court would then need to decide if a 50-50 split of that $200,000 is fair. Of course, if you and your wife are able to reach an amicable agreement regarding the division of retirement accounts, you can simply incorporate that agreement into a QDRO and submit it to the court for the judge’s approval. Either way, once the judge has approved the order, the QDRO will be given to the pension/retirement plan administrator to ensure that the assets held in the plan are distributed according to the agreement of the parties or as decided by the court.
If you are contemplating a high asset divorce that involves pension and/or retirement accounts that will likely require a QDRO, contact an experienced Fort Worth divorce attorney at Boyd Family Law to schedule your appointment today.