For many Texas couples, retirement accounts are among the most valuable assets in a divorce. Whether it’s a 401(k), pension, or government plan, dividing these benefits correctly requires not just a final decree of divorce, but also a Qualified Domestic Relations Order (QDRO). Without a properly drafted QDRO, a spouse entitled to retirement benefits may never actually receive them.
Retirement Benefits Are Community Property
Texas is a community property state, meaning most assets acquired during marriage are presumed to belong to both spouses. That presumption extends to retirement benefits earned during the marriage, even if the account is held in only one spouse’s name. [Tex. Fam. Code § 3.007].
For example, if a husband contributes to a 401(k) during 15 years of marriage, his wife has a community interest in those contributions and the community interest is subject to a “just and right” manner under Texas law—irrespective of the fact that the 401k is solely in the husband’s name. [Tex. Fam. Code § 7.001].
What Is a QDRO and Why Is It Necessary?
A Qualified Domestic Relations Order is a special court order that directs a retirement plan administrator to pay a portion of benefits to the non-employee spouse. The divorce decree alone is not enough; without a QDRO, the plan administrator cannot legally make payments to anyone other than the employee spouse.
For instance, the Texas Supreme Court confirmed in the Taggart case that retirement benefits earned during marriage are divisible community property, however, enforcement depends on having a proper order in place. Taggart v. Taggart, 552 S.W.2d 422 (Tex. 1977). This case amplifies the importance of securing a properly executed QDRO along with a divorce decree. t
Timing and Drafting Matter
QDROs must be carefully drafted to meet both Texas law and federal ERISA (Employee Retirement Income Security Act of 1974) requirements. If the language is vague, inconsistent with the retirement plan, or inconsistent with ERISA, the administrator may reject it, delay it or even prevent distribution.
Equally important is timing. If a QDRO is not signed while the trial court still has plenary powers, the QDRO is void as a matter of law. If a QDRO is not signed soon after the divorce, problems can arise such as the employee spouse retiring, rolling over funds, or even passing away before division occurs. Courts have addressed these complications, often requiring later litigation to enforce rights that could have been preserved with a timely QDRO.
Common Issues in Dividing Retirement Benefits – High Net worth Divorce
- Tracing Separate vs. Community Property
Retirement contributions made before marriage remain separate property, but contributions during marriage are community. Courts often rely on actuarial or accounting evidence to separate these interests. - Military and Government Pensions
These benefits have special rules, such as the federal “10/10 rule” for military retirement (10 years of marriage overlapping 10 years of service before direct payment is available). - Survivorship Benefits
Failing to address survivor annuities can leave the non-employee spouse without protection if the employee spouse dies first. - Plan Restrictions
Each retirement plan has its own QDRO requirements, and some benefits (like certain IRAs) do not require QDROs at all but instead are divided by direct transfer.
Protecting Your Rights
The consequences of errors in dividing retirement assets can be devastating. A spouse who is legally entitled to thousands of dollars in retirement benefits may forfeit those rights if a QDRO is not properly prepared and secured. To prevent this outcome, parties should:
- Address retirement assets early in negotiations and mediation.
- Request and review plan documents to confirm the plan’s specific QDRO requirements.
- Incorporate clear QDRO provisions in the final decree to ensure enforceability.
- File and serve the QDRO without delay following the divorce.
Final Thoughts
Dividing retirement benefits in a Texas divorce is more than a line item in the decree—it requires precision, strategy, and a properly executed QDRO. Cases like Taggart demonstrate that while retirement benefits are community property, enforcing that right depends on careful legal work.
Have questions after reading this post? Let our legal experts provide clarity and practical advice. Reach out now to discuss your case.