Retiring from Your Marriage?
Time to Consider Your Employee Benefits & Retirement Funds
You don’t have to be 65 when you retire from your marriage, but you still need take care of the funds you get when you turn that age. Will you be able to keep all of it, some of it, or none of it?
Bad news first: The presumption in Texas is that all property is community property and can be divided in a divorce.
The good news: Texas also recognizes separate property, which cannot be divided in a divorce. Separate property consists of property a person had on the date of marriage, property that was a gift, or property that was inherited.
Retirement, and certain employee benefits are presumed to be community property and can be divided by the court. If a divorcing employee believes that any of their retirement or employee benefits are separate property, the employee will have the burden to prove that it is their separate property.
It is important for both divorcing spouses to seek legal advice before dividing such assets. Why? Because bad things can happen. Example A: an employee spouse loses benefits that were rightfully her separate property. If this happens, the court cannot “fix” the problem, because it is a mistake that cannot be reversed. Example B: a non-employee loses out because the benefit was not divided correctly, sending everyone back to court. In both cases, a savvy family lawyer probably could have avoided a lot trouble.
Examples of retirement and employee benefits that can be divided by the court are: pensions, 401(k)s, employee stock purchase plans, employee stock option plans, restricted stock awards, restricted stock units, deferred compensation, state retirement (e.g. Teacher Retirement System, Texas Municipal Retirement System, Texas County District Retirement System, etc.), and federal retirement (e.g. military, Federal Employee Retirement System, Civil Service Retirement System, Thrift Savings Plan), and bonuses.
When retirement and employee benefits and plans are divided in a divorce, an order in addition to the final divorce document is almost always necessary. Such additional order is vital for the recipient to actually receive their share of the funds. Without the additional order, the recipient could lose the benefits forever. The final divorce document is not enough.
So what if you’ve been divorced (regardless how many years ago), and you were awarded a portion of your ex-spouse’s retirement or employee benefits? You should make sure that there is a proper order on file with the plan. If not, you should seek legal advice in order to obtain such an order. There is usually no time limit to obtain the order; however, if your ex-spouse dies or retires and receives all the funds, then you may be out of luck.
Likewise, the employee spouse in this example has an interest in such orders being completed for the recipient spouse. This is because the administrator of the plan may have frozen the assets in contemplation of an order being received for the recipient spouse. If this is the case, then the employee spouse may find out at retirement that they cannot start their retirement benefits until the order is completed, or until they receive proof that the ex-spouse did not receive a portion of the asset.
Let’s face it: retirement and employee benefits are often the largest, most complicated assets to be divided in a divorce. Your marriage may be over, but you’re still headed to 65…get with a family lawyer to make sure you still have these assets when you get there.
by Steve Gamel Being a sports writer is a fun gig. I mean, what sports nut wouldn’t want to show
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