In divorce, a lot of marital issues such as child support and custody, property division and alimony, must need to be resolved before a court issues a divorce decree. Just like any other properties, pension benefits can be divided between the spouses.
There are several different factors which determines whether a spouse’s pension can be split and by how much it will be divided. These factors include the time the pension was first acquired and its balance prior to the marriage and after the marriage.
Texas as a Community Property State
In the United States, there are nine community property states and Texas is one of them.
This means spouses who acquired properties after marriage have equal shares over these properties, notwithstanding the title of the spouse who actually has title to such properties.
The exception to this rule is property given as a gift by one spouse to the other during marriage or as inheritance. These properties will be regarded as separate property of the spouse receiving them as gift or inheritance and they will not be divisible in the divorce process.
The same thing applies for property each of them acquired prior to their marriage.
Pensions are considered property and the rule that is applicable for pension when it comes to division is that only the portion that was earned during the marriage may be divided by the court.
Division of Property
After the community property has been identified by the court, it will then go into the division of property between the spouses.
Texas courts divide pensions last because they will have to consider the amount of the other property awarded to the non-active spouse in the computation.
Community Property principles are followed by Texas but it also has variations which make it distinct.
The court usually follow the premise that the spouses’ community property should be equally divided.
Additional factors will, however, be considered to make sure that the court will be able come up with a just and fair result and in most cases, an uneven split may be concluded.
These additional factors include ages of each spouse, their educational background, earning capacity, marriage length, marital fault, whether one of the spouses is their children’s primary caregiver, and value of any of their separate property. These factors is also applicable to the divisible portion of the pension of the participating spouse including any interest.
Qualified Domestic Relations Order
After the determination of the division, the court will issue a Qualified Domestic Relations Order or a QDRO.
This order must be given to the plan administrator because this is the only instrument that can divide pensions.
The QDRO must have information like the addresses of both spouses, the specific plan the order applies to, and the percentage or amount to be paid to the other spouse, also known as the alternate payee.
This order must also specify the number of payments, or the period to which these payments are applicable.
Withdrawal of Proceeds
After the acceptance and approval of the QDRO by the plan administrator, payments to the other spouse will be given.
The time when he or she can withdraw the funds will be depend on the involved pension type.
Some contribution plans that are defined authorizes lump sum payments which means the nonparticipating spouse may be able to withdraw when the QDRO is accepted and approved.
However, most plans will only allow payments on a monthly basis. If the plan of the active spouse does not allow immediate withdrawals, the other spouse must wait until the retirement of the active spouse before receiving any share of the pension proceeds.