When our Woodlands divorce lawyers first meet with a new client, one of the first questions they ask us is how much it will cost to get divorced. The second question they ask us is whether they will get to keep their 401K in a divorce. The truth is, even though Texas is a community property state, very rarely are your assets divided evenly.
Will Texas Courts Divide a 401K in a Divorce?
It is true that Texas is a community property state. As a rule of thumb, when you get divorced, you and your spouse will split your marital assets down the middle. However, as explained in Texas Family Code §3.003, it very rarely is this simple.
Some assets are a lot harder to divide than others. Your 401K and other retirement accounts are perfect examples of this. Before your Woodlands divorce lawyer can explain whether you’ll keep your 401K in a divorce, they need to determine how much of your 401K you contributed during the marriage.
Courts Won’t Always Slit a 401K in a Divorce 50/50
You can ask some divorce attorneys in The Woodlands, and they will tell you that your marital assets will be divided 50/50 in the divorce. This answer can be misleading. That’s because, as far as community property is concerned, Texas family law judges distribute them based on equity and fairness.
What this means is that the courts will look at the position of each spouse to gauge how the marital assets should be divided. For example, if one spouse earns twice as much as the other, they will more than likely retain a smaller portion of the community property.
Retirement Accounts Are Considered Community Property
Unfortunately, your 401K and other retirement accounts are considered community property for the purposes of divorce. What this means is that there is a good chance your 401K will be split with your spouse.
It is important to understand, however, that this will only apply to the portion of your retirement accounts that you accrued during the marriage. Any money that you deposited and earned in your 401K before you got married will be considered separate property in the divorce.
What About the Money You Invested in Your 401K Before Marriage?
Many of our clients are confused when we explain how their retirement accounts will be distributed in the divorce. When they hear that retirement accounts are considered community property, they naturally assume that their spouse will get half of their money.
Our divorce attorneys in The Woodlands try to explain to them that, even if this were the case, they would be entitled to half of their spouse’s 401K as well. If your spouse has a 401K that is much larger than yours, this could be a significant benefit.
Assets acquired before marriage are considered separate property. This rule applies to a 401k in a divorce. What this means is that a portion of your 401k account most likely won’t be divided.
Your Divorce Attorney in The Woodlands, TX Will Argue That Your 401K is Separate Property
When you first present your Woodlands divorce lawyer with a copy of your debts and assets, they will determine which assets are separate and which are community property. Whatever assets they deem community property will likely be divided evenly between you and your spouse.
Conversely, any assets that are considered separate property will be yours in the divorce. Your spouse will not be entitled to a share of any of your separate property. This means that you will not be entitled to any of your spouse’s separate property either.
You need a skilled attorney to help you retain as much of your 401k in a divorce as possible and get your fair share of your spouse’s.
The Court Will Likely Determine That a Portion of Your 401K is Separate Property
What the judge will do is look at a list of all debts and assets accrued during the marriage. First, they will identify any debt or asset that a spouse had coming into the marriage. This property will be deemed separate property and will not be subject to equitable distribution.
Whatever property is left will be deemed community property. The short answer is that this property will be divided evenly between you and your spouse. However, the court will look at several factors in order to determine the fairest way of dividing these assets.
What Factors Do the Courts Consider When Dividing Community Property?
One thing our divorce attorneys in The Woodlands, TX tell our clients is that it isn’t always a good thing to leave these decisions up to the judge. This is because the family court judge will use their own subjective factors when making this determination.
Some of the factors the court will consider when dividing your marital property include the following:
- The education level of each spouse
- The length of the marriage
- The earning potential of each spouse
- The relative health status of each spouse
- Whether one spouse has full custody of minor children
- The current income of the parties
- The overall financial position of the spouses
There is no way to know for sure how the judge will make their decision. That’s why it’s better for your Woodlands divorce lawyer to work things out with your spouse’s attorney.
There’s a Good Chance Your Woodlands Divorce Lawyer Will Negotiate a Settlement
Our divorce attorneys in The Woodlands, Texas always tell our clients not to get upset about the prospect of splitting their assets with their spouse. Usually, in any divorce we handle, we are able to negotiate a property settlement agreement with your spouse’s divorce lawyer.
Both parties understand that they could walk away from the divorce with less than they feel they deserve if they leave it in the judge’s hands. Sometimes, it makes more sense to agree on terms yourselves rather than force the judge to make these decisions for you.
It’s in Your Best Interest to Retain an Experienced Divorce Attorney in The Woodlands
If you’ve decided that you’re ready to file for divorce, it’s a good idea to speak with an experienced Woodlands divorce lawyer. Once you file for divorce, you will have to disclose all of your personal and marital assets. It’s a good idea to know which of these assets will be considered community property before you file.
We recommend that you contact our office and ask to schedule an appointment with one of our divorce attorneys in The Woodlands, Texas. Pick a date and time that works for you and come to the office with as much information as you can on your debts and assets.
There’s a good chance your spouse will have a Woodlands divorce lawyer working for them and you should too. Otherwise, you will be at a serious disadvantage and will risk losing your fair share of marital assets.
