When you get divorced, most of the assets that you share with your spouse or that you acquired during the marriage become vulnerable to division. Unless you have a legally valid prenuptial agreement on record that protects certain assets as separate property, most everything you earned and acquired during marriage will be subject to division under the community property laws that guide divorce in Texas.
Many people don’t understand that community property means everything owned or earned during marriage, with the exception of assets you held prior to marriage or acquired through inheritance. Even assets that you hold solely in your own name can wind up split in a divorce. That includes your pension, even if your spouse never contributed a cent to it.
How much of the pension is vulnerable to division?
Most people have heard horror stories about someone they know who lost more than half of their assets in a divorce. Although community property standards don’t mandate a 50/50 split of each asset, they do require that the courts review and fairly split any income and assets acquired during the marriage, as well as any debts acquired by the couple.
Any pension amounts deposited or accrued prior to your marriage will typically remain your sole and separate property. However, whatever amount you saved and invested throughout the marriage will likely become marital property, meaning the courts will split it up. Although the pension may be a benefit in your name only through your employer, the amount you earned during marriage likely also partially belongs to your spouse in the eyes of the Texas family courts.
How do the courts divide a pension?
Unlike a retirement account, which has a balance that a plan administrator can divide and transfer, a pension often involves a slowly accruing balance that results in weekly or bi-weekly payments directly to a retired employee by their former employer or pension administrator. Splitting it isn’t always as simple as ordering a division of the account during the divorce.
The courts may determine the value of the pension that is community property versus how much remains separate property and allocate other assets that represent roughly half the value of that community portion of the pension to your spouse. The courts could also allocate more of the marital debt to the person who holds the pension in recognition of their ownership of more assets.
If you are close to retirement age and your spouse does not have their own pension or earning potential, the courts may also order spousal support or alimony for the duration of the pension. Military pensions have their own rules, depending on the length of the marriage and certain other factors. The more complex the assets you’ve acquired during your marriage, the more important it becomes to plan to protect them and your financial future in a divorce.