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Protecting a retirement account during divorce

Older adults in Texas may be more likely to get a divorce than their parents or grandparents were, and one big concern they may have throughout the process is what will happen to their retirement accounts. A study by the National Center for Family & Marriage Research found that in 2014, adults over 50 were twice as likely to get a divorce than the same age group was in 1990. Adults over 65 were three times as likely.

Couples should keep in mind that a retirement account is generally considered marital property even if only one of them contributed to it. A dependent spouse who may be unaware of the account's worth might be tempted to exchange it for the family home, but this may be a mistake. Upkeep on the home might be costly.

Taxes are another consideration. Most retirement accounts are taxed on withdrawal, so couples should consider the post-tax worth of the account. Furthermore, if one spouse is in a higher tax bracket than the other, then an equal distribution may be taxed at a higher rate for one of them. After the divorce is final, the parties should also remember to review all of their accounts and change the beneficiaries if necessary.

A retirement account may be only one of many valuable assets in a high-asset divorce. Although Texas is a community property state, all of those assets may not be split 50/50. The first step will be to determine what counts as marital property. A prenuptial agreement might also change how property is divided. People who are concerned about their financial situation after a divorce may want to make consulting an attorney one of their first steps.

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