One of the main concerns for couples getting divorced in Texas is splitting their retirement assets. Given that retirement accounts, like IRAs, could be your largest asset, something you have been saving up for almost all your working life, how does the state treat it during a divorce proceeding? Read on to find out.
Determining marital and separate IRA
Opening IRA and other retirement accounts requires only one person (one account holder), which is quite a different case for other assets like your bank account or home. But, since Texas is a community state, the family law considers all the money deposited into the IRA when you were married as marital property. It doesn’t matter if you were the only person that earned all that money; your spouse has equal claim to it.
It is also important to note that the money deposited in the IRA prior to your marriage will not be divided equally. The court considers it separate property. And this is where it gets complicated because the court and your attorney will have to determine interests, fluctuations, and any other factors that may have affected that money, including the time you were married.
Dividing marital IRA
Marital IRA is the amount that you or your spouse saved up during the time you were married. This money is subject to equal division between divorcing couples. On other occasions, you can make an official settlement agreement on how you would like to split it, which the court might consider.
Nonetheless, an IRA is subject to tax depending on how you separate it. For instance, the account holder will face tax penalties if they transfer the funds to their spouse in any other form besides sending it directly to their IRA. Therefore, it would be much easier for you if your ex-spouse opens up their own new IRA, which you will send money directly to in order to avoid being taxed.
It would be best to consult with a divorce attorney to determine how best to handle your IRAs during marriage dissolution. Divorce is a highly sensitive matter that can get ugly pretty quickly and easily. Some help would go a long way.