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Texas couples, retirement accounts and divorce

Statistics indicate that a large percentage of Texas residents will divorce each year. With the decision to divorce comes a number of other decisions that need to be made including who gets the house, who will have custody of the kids and the amount of spousal support to be paid. For many, decisions regarding pension plans and retirement accounts are also important considerations.

A Qualified Domestic Relations Order is one document that is at the center of most divorce discussions related to pension plans and retirement accounts. Before deciding exactly how to divide these assets, one will want to investigate exactly what each plan allows and then identify the best way to divide these assets. The QDRO often dictates what is allowed under each plan.

In addition to the QDRO, many individuals will want to analyze the value of each asset after taxes have been considered. IRAs and pension plans are typically taxed when withdrawals are made; therefore, it is likely that these assets will be taxed after a divorce is finalized, which may impact the value of these assets in the divorce. For this reason, contributions that were made to a Roth IRA or 401(k) plan may be more lucrative for the recipient.

When a Texas couple decides to divorce, many financial decisions will need to be made. One of the most important decisions will involve how pension and retirement assets will be divided. In making this decision, one will want to consider the value of the assets both before and after taxes have been assessed.

Source: U.S. News & World Report, "12 Steps to Protect Your Money in Divorce", Christine Giordano, Aug. 15, 2016

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