Most people living in Texas have heard at one point or another that the state has a community property law. What you earn or purchase while married belongs both to you and to your spouse. You generally have to divide those assets when you divorce.
Negotiating a property division settlement can speed up the divorce process and potentially reduce how much it costs you to end your marriage. However, you need to ensure that you take the right steps both to protect yourself and your assets, or you risk losing the very property you want to protect in your divorce proceedings.
Retirement accounts are a perfect example. If you are younger than retirement age, there could be taxes and penalties assessed because of an early withdrawal from your retirement account. You not only need to divide the account, but you also need to protect yourself from secondary losses. You may need a qualified domestic relations order (QDRO) to avoid those penalties. How do you obtain one of these specialized documents in a Texas divorce?
One of the lawyers will draft the QDRO
When a judge enters a property division order or approves a settlement agreement negotiated by you or your lawyers, you then know the exact property division rules in accordance with your divorce decree. Those terms are necessary for the creation of and xx. The lawyer representing one of the divorcing spouses will draft a QDRO that accurately reflects the terms in the property division order.
The courts have to review the document for accuracy and compliance. The document then requires submission to the benefits manager or plan administrator handling the retirement account. That professional can then withdraw a portion of the account in accordance with the QDRO and deposit those funds into a newly recreated retirement account.
Proper execution of a QDRO will preserve as much of the retirement savings as possible and eliminate the taxes and penalties that stem from early withdrawals. Couples can potentially avoid those extra steps when negotiating property division matters by choosing solutions that consider the value of retirement savings but do not mandate the division of individual accounts.
Understanding how to protect your most valuable property will help you as you prepare for a high-asset Texas divorce.