20 Jul Can I Remove Money from My 401k After I Separate?
Retirement planning is something important that you should start doing once you begin working. Then, it seems retirement is far away, but before you know it it is your last day of work ever.
While some jobs still include pensions, those are fewer and farther in between. Many people have to contribute to a 401k (or if you work for a non–profit, a 403b). Your 401k is a fund that you pay into as you work. The money gets taken out of your paycheck before taxes. This can help lower your tax bracket. Many places of employment match your contribution up to a certain percentage.
While your 401k is meant for retirement, you can remove money from the fund whenever you want. Some withdraw money before retirement if they are financially struggling.
When it comes to the end of your marriage, the specifics around all assets come into question. This includes your 401k. If you are separated? Can you remove money from the fund and if so, what happens?
The most important thing to note is if you are separated from your spouse you are not divorced. Some states recognize legal separation as a middle step before the legal dissolution of the marriage. Texas is not one of them. You cannot file for separation and it is not a legal concept in that state.
This means that any property you have or acquire while you are separated is still considered marital property.
In divorce proceedings, all marital property in Texas is split equitably. This doesn’t necessarily mean a 50/50 split, but it does equate to that many times. Unless you have your 401k noted in a pre-or post-nuptial agreement, it is considered marital property.
If you take out your 401k while separated, you will need to return an equitable share of the withdrawal amount to your spouse as part of the divorce resolution. While you might be able to trade some of this with other assets, there is no guarantee.
In a Texas divorce, payments to someone who is not the title owner require a formal Qualified Domestic Relationship Order (QDRO) signed by the family law judge. The QDRO details how the 401k gets divided, when, and who payments go to.
If you are separated and considering taking money out of your 401k, you should talk to a divorce attorney. Your attorney can help look at your situation and advise you on what to do. If you do decide to take money out, they can let you know what kind of share you might have to pay back in the future or how you can use other assets.
When it comes to divorce proceedings, having an experienced divorce lawyer is critical. Splitting your assets in a community property state can be difficult. Texas is a community property state, and you want to come out with a divorce settlement that is fair to you. A divorce attorney can help with that. They can advocate for a settlement that lets you keep what you deserve and work hard to earn.
If you are in Texas and near Denton, contact Navarrette Bowen P.C. Our team has years of experience, a large wealth of knowledge, and attorneys that are Board Certified in Family Law by the Texas Board of Legal Specialization. Contact us for a free confidential consultation today.