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Specialty tag(s): Gray Divorce, Divorce Arbitration, Dividing the Marital Home, Divorce

How Pension Division Actually Works in Gray Divorce

Angel J. Berbarie | February 12, 2026

When a spouse has spent decades earning a pension, dividing it in a divorce can feel overwhelming. There’s no account balance to point to – just a promise of future income that was meant to support you in retirement. Now you’re being asked to make long-term financial decisions that will affect your security for years to come.

Dividing a pension means understanding how that future income is valued, how it’s shared, and what protections ensure it actually shows up when you need it. The mechanics involve formulas, court orders, and plan-specific rules that vary depending on whether it’s a private pension, military benefits, or a government plan.

In this guide, we’ll walk through how pensions are valued, how Texas courts determine the marital share, and the steps that make everything work the way it should – so you can make steady, informed decisions about your financial future.

Pensions vs. Other Retirement Assets

Not all retirement assets are built the same, and the way they’re divided in a divorce can vary significantly depending on the type of plan involved.

Defined-Benefit vs. Defined-Contribution Plans

Dividing a 401(k) or IRA is usually more straightforward than other kinds of retirement assets: there’s a visible account balance, and percentages can be applied directly. A defined-benefit pension, on the other hand, works very differently. Rather than a pool of money sitting in an account, you have a contractual promise from an employer to pay a specific monthly amount for the rest of the retiree’s life, beginning at retirement. There’s no balance to point to, and nothing to divide on paper.

Because you’re dealing with future income rather than present dollars, courts must determine what that promise is worth today. Doing this requires actuarial calculations based on life expectancy, discount rates, and projected retirement dates. Small changes in any of these assumptions can materially shift the valuation – sometimes by tens of thousands of dollars – which is why pension division can often feel uncomfortably opaque for the spouse relying on clarity. 

In Texas, there’s a further layer to this as retirement assets are typically valued as of the date a settlement agreement is signed or the date the case goes to trial, where the Court will determine the property, not the date of separation or filing. If months pass between separation or filing and reaching an agreement or getting a ruling from the Court after a trial, market movement or salary increases can alter the pension’s value. Deciding who bears that risk often becomes part of the negotiation itself or arguments made to the Court regarding the property division.

When Pensions Must Be Divided – and When They Don’t

Under Texas Family Code § 3.003, property held by either spouse during or at the end of the marriage is presumed to be community property subject to division. The spouse claiming that an asset is separate must prove it with clear and convincing evidence.

Pension benefits earned entirely before marriage remain separate property. If contributions continued during the marriage, only the pre-marital portion is exempt – and establishing that typically requires precise documentation showing when the pension began and what accrued before the marriage.

Valid prenuptial agreements that designate retirement accounts as separate property generally control how, or whether, a pension is divided.

In practice – especially in gray divorce – this is where things become emotionally and logistically complex. After 20 or 30 years of marriage, records may be incomplete, employers may have merged or disappeared, and the distinction between what existed before marriage and what was built together can be difficult to untangle. Proving a separate property claim often requires forensic accountants to reconstruct decades of employment and benefit history, adding both cost and emotional strain to an already demanding process.

How Pension Division Works in Texas

Understanding how Texas courts determine what portion of a pension is marital property is vital to making sound decisions for your future.

Calculating the Marital Share

Texas courts use established formulas to determine what portion of a pension counts as community property. The Berry formula applies when benefits haven’t started paying yet; the Taggart formula applies when they have. While the names differ, the underlying logic is the same.

The months you were married during your spouse’s employment are divided by their total months of employment, and that fraction is applied to the monthly benefit. If your spouse worked for 30 years and you were married for 20 of them, roughly two-thirds of the pension is considered community property.

Identifying the community portion is only the first step. Dividing it is a separate decision. Texas law requires a division that is “just and right,” which often – but not always – results in a 50/50 split of the community share. Courts can adjust that outcome based on factors such as earning capacity, health, and the presence of separate assets.

Under the Berry formula, the benefit value is fixed as of the divorce date, which means the non-employee spouse does not share in promotions or post-divorce salary growth, though cost-of-living adjustments may be included if the decree clearly provides for them.

Division Methods

How the pension is divided can matter as much as how much you receive. Texas recognizes several approaches, each carrying different financial and emotional implications.

Deferred distribution (percentage of monthly benefit) means the non-employee spouse waits until retirement and then receives a percentage of each monthly payment directly from the plan, pursuant to a court order. This avoids disputes over future value but keeps both parties financially connected over time.

Deferred distribution (fixed dollar amount) also begins at retirement, but with a set monthly payment instead of a percentage. It offers predictability, though it does not automatically adjust for inflation unless the decree says so.

Immediate offset takes a different approach. An actuary calculates the present value of the future pension, and the non-employee spouse receives equivalent value now through other assets such as home equity, investments, or cash. This creates a clean break, but the assumptions matter. As highlighted, small changes in discount rates or life expectancy – especially in gray divorce cases – can shift valuations by tens of thousands of dollars.

The right structure depends on whether you want a clean financial separation or are comfortable with ongoing ties, and how much confidence you have in long-term valuation assumptions.

Why Pension Division Matters More for Some Spouses

Pensions are built on continuity – long careers with a single employer. For a spouse who reduced hours, moved between jobs, or stepped away from paid work to care for family, there may be little pension of their own. In those cases, a share of the working spouse’s pension is the foundation of future financial stability.

Research shows women over 50 experience an average 45% drop in standard of living after divorce, compared to 21% for men, largely reflecting these career tradeoffs. And so, although on-paper precision and fairness matter, getting pension division right ultimately comes down to whether you’ll have a reliable income and security at the stage of life when it matters most.

QDRO Errors and Irreversible Losses

Dividing retirement assets hinges on a single, highly technical document where small mistakes can have an outsized impact.

What a QDRO Does – and What Goes Wrong

A Qualified Domestic Relations Order is the document that tells a private pension plan how – and to whom – to pay benefits after divorce. Without it, your decree has no practical effect. The plan administrator cannot act on intentions or agreements alone.

When done correctly, a QDRO allows retirement assets to be divided without early-withdrawal penalties or immediate tax consequences. Federal law protects the transfer, and funds can be rolled into the receiving spouse’s own retirement account. However, when done poorly, or when delayed, the consequences can be permanent.

Texas’s “Rule of Finality” is where many people get caught. Once a judge signs the divorce decree and 30 days pass, the court loses authority to change the substance of the property division. A QDRO filed years later that contains errors may be impossible to fix if correcting it would alter what the decree originally awarded.

There is a narrow safety valve. Texas Family Code § 9.1045 allows courts to clarify a QDRO so it accurately reflects the decree, correcting clerical mistakes or adding an omitted plan name. But Section 9.007 draws a hard line: courts cannot amend or change the substantive division of property. If an error affects what you are entitled to receive, there may be no remedy.

This is why QDROs should be drafted carefully, submitted to the plan administrator for pre-approval, and finalized alongside the divorce decree rather than treated as administrative cleanup for later.

Survivor Benefit Elections

Survivor benefits determine whether pension payments continue to a former spouse after the employee spouse dies, or stop entirely. For private-sector pensions governed by ERISA, this hinges on precision. If the QDRO does not explicitly award survivor benefits (such as QPSA or QJSA protections), payments typically end at the pension holder’s death. It’s a critical detail that generic templates often overlook.

Survivor benefits are also a point of negotiation. A non-employee spouse may agree to a smaller monthly share in exchange for guaranteed survivor income. Because survivor coverage usually reduces the retiree’s monthly benefit, decisions often reflect health, age, and life expectancy on both sides.

Military pensions are less forgiving. Federal law requires the service member to convert spouse coverage to former-spouse coverage within one year of divorce. If that doesn’t happen, the former spouse must act within the same window. Missing the deadline almost always means losing survivor coverage permanently, and Texas courts cannot undo that result.

Federal civilian plans under CSRS or FERS operate differently. Survivor benefits are capped at 55% and 50%, respectively, and require a permanent reduction in the retiree’s annuity. Texas governmental plans, including ERS and TRS, follow their own rules entirely. Each plan is different, and the governing documents must be reviewed closely.

These details are easy to miss and hard to fix later. Taking the time to address them carefully with informed legal guidance can be the difference between long-term security and an outcome that cannot be unwound.

Get clarity on the pension details that matter most

GBA Family Law provides precise, plan-specific guidance so critical details don’t get missed, and your future isn’t left to chance.

Beyond the Pension: Other Factors That Shape Negotiations

Healthcare Coverage and the Medicare Gap

Divorce is not only a financial turning point, but it can also quietly disrupt your sense of security, especially around healthcare. Divorce qualifies as a triggering event that allows a dependent spouse to continue coverage through COBRA for up to 36 months, but at 102% of the full premium. For many older adults, that cost exceeds $1,000 per month. With Medicare eligibility beginning at 65, a 58-year-old losing spousal coverage may face up to seven years of costly COBRA or individual market insurance.

This gap often becomes an important, if somewhat overlooked, point of negotiation. Having the employed spouse cover COBRA premiums as part of the settlement can provide essential bridge coverage, often worth more than an equivalent cash payment, particularly where pre-existing conditions make private insurance difficult or expensive. Because Texas spousal maintenance is not a given, and on the occasions it is awarded, it is tightly limited – five years for marriages of 10–20 years, seven years for 20–30 years, and ten years for marriages over 30 years – addressing healthcare as a separate line item can produce more durable protection than relying on time-limited maintenance alone.

Social Security and the 10-Year Rule

Texas courts cannot divide Social Security benefits, but federal law offers meaningful protections that many people are unaware of. A divorced spouse married for at least 10 years may claim spousal benefits of up to 50% of the ex-spouse’s full retirement benefit, or survivor benefits of up to 100% if the ex-spouse dies, without reducing the ex-spouse’s own benefit.

If your marriage is approaching the 10-year threshold, delaying finalization by even a few months can preserve access to benefits that pension division cannot replace. This consideration is especially significant when one spouse has limited retirement savings of their own.

Housing Decisions in the Current Market

The family home is often exchanged for pension value through an immediate offset, but today’s market makes that trade far more complex. Buying out a spouse’s equity typically requires refinancing, which may mean replacing a 3% mortgage with one at 6.5–7.5% – sometimes doubling monthly housing costs on a single income.

For older Texans, the analysis is more nuanced. Texas provides meaningful property tax relief for homeowners aged 65 and over. Recent legislation increased the school district homestead exemption from $100,000 to $140,000 (SB 4) and raised the additional exemption for those 65+ from $10,000 to $60,000 (SB 23). Together, these exemptions can shield up to $200,000 of home value from school taxes. Texas also allows homeowners over 65 to transfer – or “port” – their property tax ceiling to a smaller home, making downsizing a more viable post-divorce option.

Wanting to keep the house is deeply human. It represents continuity in a season of upheaval. But when housing costs become unsustainable, that sense of security can quickly erode. Pension-for-home trades require a clear-eyed assessment of ongoing carrying costs, not just equity on paper.

Protecting Your Retirement in a Gray Divorce

Pension division can feel daunting, especially when it touches the future you’ve spent decades working toward. While the mechanics are technical – actuarial assumptions, QDRO timing, survivor benefit elections – the purpose is simple: protecting your long-term financial security. These details matter because missteps are difficult, and sometimes impossible, to reverse. But you don’t have to shoulder that responsibility alone.

GBA’s family law attorneys combine deep technical knowledge with the perspective that comes from handling complex retirement assets over many years. With 31 board-certified specialists and experience guiding cases through appeal, we help you understand your options and make decisions with clarity and confidence. We know how much is tied up in these choices, and we approach them with the care they deserve.

If you’re facing a gray divorce and have questions about protecting your retirement, get in touch. We’re here to help you understand your next steps.

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