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Splitting retirement savings in a divorce

It is possible that proceeds inside of a retirement account will need to be divided in a divorce. Therefore, it is important for an individual to understand asset division rules regardless of whether that person will benefit from the transaction. In Texas, assets are considered community property, which means that they will generally be split 50/50. However, other factors could determine how assets, such as retirements accounts, may be allocated in a final settlement.

It is possible that an individual will have an emotional attachment to a retirement account. This is because that money typically represents years or decades of hard work and discipline on his or her part. In many cases, losing a portion of a 401(k) or IRA may impact a person's financial security later in life. Therefore, both parties to the divorce should be ready for a potentially contentious asset division process.

An individual may decide that he or she would rather keep the house instead of taking a share of a 401(k) or another account. However, it is important to account for property taxes, maintenance costs and other fees associated with keeping a home or other assets. If a couple decides to split a qualified retirement account, such as a 401(k), it must be done per the terms of a qualified domestic relations order, or QDRO.

Couples who are choosing to end their marriage may benefit from working with a mediator. During the divorce mediation process, a neutral party can help each person speak freely about what he or she wants and needs from the final divorce settlement. This may make it easier to come to an agreement in less time and with less emotional turmoil. In some cases, mediation may cost less than settling a divorce in court.

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