How are retirement assets divided for high net-worth divorces?

Divorce is never an easy process, but it becomes especially difficult for couples owning multiple homes, substantial investment and retirement accounts, stakes in private businesses, luxury vehicles, and trust funds or substantial inheritance. Assets like these require careful consideration during the property division portion of the divorce proceeding.

One of the first considerations is listing all marital assets subject to division. It is important to pay close attention to retirement assets as these accumulate over time. Many times, retirement assets are funded over decades, and it is almost impossible to recreate this level of growth after divorce. As a result, it is important to make sure you consider how the division of retirement assets will impact your life after the divorce is finalized. An informed decision can mitigate the risk of financial surprises in the future.

How does the court split these assets during divorce?

In Texas, the law generally considers retirement accounts acquired during the marriage community property. This means they are often subject to division upon divorce. While the division is not always a strict 50/50 split, the law guides the courts to make a split that is just, taking into account various factors includng the rights of each party and any children of the marriage.

What assets should I review when focusing on retirement?

The exact composition of each retirement portfolio can vary, but often include the following:

  • 401(k)s and IRAs: In Texas, these accounts are generally subject to equitable division. The courts may split the portion accrued during the marriage. It is important to factor in any potential tax implications and early withdrawal penalties.
  • Pensions: Defined benefit plans may qualify as marital assets. It is important to get an accurate valuation of this asset, which generally involves assessing the present value. Division may require specialized legal documentation such as a Qualified Domestic Relations Order (QDRO).
  • Stock options and RSUs: The state may also consider stock options and restricted stock units (RSUs) acquired during marriage marital property subject to division during divorce.

Those going through a divorce are wise to get proper valuations for each of these assets and carefully consider how proposed division would impact their future. Although these are typical retirement assets in a wealthy couple’s portfolio, each divorce case is unique. It is important to carefully review your case and make sure your divorce negotiations are tailored to your situation.