Will a Divorce Affect My 401(k)?
Getting a divorce is always an emotionally and financially taxing process. You and your spouse will need to reach an agreement on how you want to divide your assets, including retirement accounts such as 401(k).
However, for many divorcing couples, the division of property is the most disputed aspect of divorce. Below, we will discuss how a divorce can affect your 401(k) assets and how you can prevent your soon-to-be-ex-spouse from withdrawing funds from retirement accounts during the divorce.
Contact our Pearland divorce attorney at John Powell III, P.C., to help you protect your 401(k), retirement accounts, savings accounts, and other assets during your divorce.
How Are 401(k) Accounts Divided in a Texas Divorce?
The division of 401(k) accounts in a divorce depends on three main factors:
- Your state’s property division laws;
- How much you contributed to your 401(k) during the marriage; and
- Whether or not you have a prenuptial agreement in place.
Typically, any funds contributed to retirement accounts, including 401(k), are considered marital property. Texas law defines marital property as community property. Community property is subject to just and fair division upon divorce unless the parties signed a prenuptial or postnuptial agreement that provides for an unequal distribution of the couple’s property.
For example, if you were married for eight years and during the marriage you contributed $80,000 to your retirement account, your spouse could be entitled to 50% of the funds. Often, when spouses have 401(k) or other retirement accounts with a similar amount of funds, they may decide to avoid dividing their accounts.
Do All 401(k) Funds Belong to Both Spouses in a Divorce?
Not necessarily. Whether or not all of your 401(k) funds belong to both spouses depends on when the contributions to the account were made.
- Any contributions made before the marriage are considered separate property and are not subject to division in a divorce; and
- Any contributions made during the marriage are community property and are subject to a fair and reasonable division unless there is a prenuptial or postnuptial agreement in place.
In many cases, 401(k) and other retirement accounts are composed of both separate and community funds, which makes the division process more complicated.
With 401(k) plans, the length of the marriage does not affect the division of the funds. Whether or not your 401(k) will be split between you and your soon-to-be-former spouse depends on how much you contributed to the account during the marriage.
How to Prevent Your Spouse from Withdrawing Funds From 401(k) Before and During the Divorce?
Many people going through or contemplating a divorce fear that their spouse will cash out their retirement accounts before or during the divorce. Many counties in Texas have standing orders that are in place to prevent the divorcing parties from withdrawing funds from retirement accounts until after their divorce is final.
If your county does not impose a standing order upon filing for divorce, you need an attorney to help you obtain a temporary restraining order preventing your spouse from cashing out. Contact our Pearland division of assets attorney at John Powell III, P.C., to discuss your particular situation. Call 832-850-6095 to receive a case evaluation.