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How Are Retirement Benefits Divided?
Retirement Benefits are classified as property and therefore can be subject to a "just and right" division by the court. Retirement Plans are viewed by the Texas courts as indirect compensation to a spouse, which is actually an income, earned by the spouse during the marriage.
Any contributions to a retirement plan made during the marriage will be viewed as community property by a Texas court and subject to division on divorce Once an employee becomes vested with the company, the employee will receive those benefits upon reaching retirement age. If an employee does not work long enough to become vested with the company, upon leaving employment, the company returns the contributions made by the employee and any contributions made by the company are forfeited.
When contributions are made by the employee and the company prior to manage, the benefits are construed as separate property, while the benefits contributed by the employee and company after the marriage are community property.
A Defined Benefit Plan is a retirement plan based upon a vested right to a specified monthly income.
A Defined Contribution Plan is a retirement plan based upon the contents located in the individual account.
Military Reservist's Retirement is different from both the Defined Benefit and Defined Contribution Plans in that the Military Reservist's Retirement is based upon a point system and is not computed on the total number-of months served. If military service began prior to marriage, the points earned are separate property and only the points acquired during the marriage will be considered community property.
Even if the spouse is not retired at the time of divorce, the drafting of the final decree will reflect what portion of the retirement benefit be paid to the non-employee spouse LF, AS, AND they are received from the employee's retirement program. The formula used is based on the benefits the spouse would have received had they been eligible to retire at maximum time.
One suggestion is that spouses cash out the non-employee spouse and keep the retirement benefits in the employee spouse's name.
The courts value the retirement plan at the date of divorce, and not the actual value of the actual retirement benefit. Therefore, keep in mind, the value of the community interest in the retirement plan at the date of divorce is not the same as the actual value of the retirement benefit. Taking into account the value of the retirement plan after the divorce would invade the employee of his separate property, NOTE: If, during the marriage, a couple moves with a company from state to state, the Texas courts will characterize retirement benefits in accordance with. the laws of the residence at the time the benefit is accrued. If a couple lives 'in a common law, state for 10 years, those ten years of retirement benefits will be classified as separate property of the employee spouse and not subject to the "just and right" division of the Texas courts.
Grounds for divorce in Texas include irreconcilable differences and being unable to re-unite as well as adultery, abandonment, commitment to a mental health facility for three years, a felony conviction and imprisonment for at least one year, cruel and inhuman treatment, or living separately for at least three years. The most common divorce grounds for an uncontested divorce are irreconcilable differences and living separately for at least three years because these are the two grounds that do not place blame or fault.
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