Wednesday, September 14, 2016

Retirement accounts and property division

Originally published by On behalf of Wayne Ward.

Overall divorce rates have remained fairly constant in recent years, but the rate of people over the age of 65 ending their marriages tripled between 1990 and 2014. Property division negotiations during a divorce can quickly become heated when the spouses involved are approaching their retirement years, and this can be particularly true in states like Texas with community property laws. These discussions often focus on spousal support or the funds that have accumulated in retirement accounts.

The community property laws of Texas require family law judges in the state to divide all marital assets equally when divorcing couples are unable to reach an amicable settlement agreement and have no prenuptial or postnuptial agreement in place. This means that retirement accounts that have been built up during a marriage will be shared by both spouses even if one of them made all of the financial contributions. The money put into IRAs or 401(k)s prior to a marriage may be considered separate property, but any contributions that are made after a couple walks down the aisle must be shared, as well as the appreciation in value of the account.

Before entering into a settlement agreement, divorcing spouses may wish to consider how taxes will impact their retirement income. While Roth IRAs and 401(k)s contributions come out of income that has already been taxed, withdrawals from other plans are subject to tax. This means that divorcees who are in a higher tax bracket than their former spouses will receive less after-tax retirement income if these funds have been divided equally.

Experienced family law attorneys in community property states like Texas may recommend a prenuptial agreement to couples who wish to avoid lengthy court battles should they choose to divorce. While these agreements may contain provisions that do not follow strict community property rules to the letter, they could be unenforceable if they are not essentially fair.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.



from Texas Bar Today http://ift.tt/2crWhIB
via Abogado Aly Website

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