Divorce and Account Designations in Texas: When an Ex Spouse Stays (and When They Do Not)
One of the most common and expensive surprises after a death is this: the decedent’s “probate” estate is modest, but a large retirement account, stock plan, or investment account passes by beneficiary designation. Then everyone discovers the named beneficiary is an ex spouse.
The situations can be heartbreaking. Absent special circumstances, not many people want their ex-spouse to receive their assets. The Texas legislature recognized that and passed Texas Family Code § 9.302, which deals with that situation.
That law is directly at this problem for certain plans. It does not fix every scenario, especially for employer plans governed by federal ERISA rules. However, it provides a starting point for anyone dealing with beneficiary disputes in Texas probate litigation.
What is an “account designation”
Many valuable assets transfer at death outside probate, by contract, including:
IRAs and other retirement accounts
Employer plans and financial plans (such as savings, bonus, and profit sharing plans)
Stock options and employee stock plans
Some bank and brokerage “payable on death” or “transfer on death” arrangements
When an asset transfers by designation, the institution generally looks first to the beneficiary form on file, not the will.
The Texas rule for many retirement and financial plans: Family Code § 9.302
Texas Family Code § 9.302 is often called a “redesignation” statute. In plain English, it says:
If someone named their spouse as beneficiary before divorce, and the divorce is later finalized, that old beneficiary designation is not effective in favor of the former spouse unless one of three exceptions applies.
The three exceptions that can keep the ex spouse as beneficiary
Under § 9.302(a), the ex spouse can still take if:
The divorce decree itself designates the former spouse as beneficiary. 9302 Pre-Decree Designation of …
The account holder redesignates the former spouse after the divorce (for example, signs a new beneficiary form after rendition of the decree). 9302 Pre-Decree Designation of …
The former spouse is named to receive the proceeds in trust for, on behalf of, or for the benefit of a child or dependent of either former spouse.
If none of those apply, the pre divorce designation in favor of the ex spouse is typically ineffective under Texas law.
Two important limitations built into § 9.302
1) It does not decide ownership interests created by the divorce
Even if § 9.302 affects the beneficiary label, subsection (d) clarifies it does not eliminate a former spouse’s ability to claim an ownership interest in an undivided pension or plan interest under the Family Code’s post decree property rules. 9302 Pre-Decree Designation of …
2) It does not apply to certain public retirement systems
Section 9.302(e) excludes “public retirement systems” as defined in the Texas Government Code.
The ERISA warning: federal law can override Texas’s divorce statute for many employer plans
Here is the trap: many retirement benefits are governed by ERISA (federal law). The United States Supreme Court has held that ERISA can preempt state “divorce revokes beneficiary” statutes as applied to ERISA plans.
Texas courts have recognized this problem in the context of § 9.302.
What that means in practice
The plan administrator may be required to pay the named beneficiary on file, even if that person is an ex spouse.
The fight may then shift to whether other claimants can pursue the ex spouse after payment, depending on waiver language in the divorce decree and how federal courts treat that waiver.
Bottom line: do not assume divorce alone fixes an ERISA beneficiary designation. This is a frequent driver of interpleader actions and probate-adjacent litigation.
Common questions (FAQ)
“Does divorce automatically remove my ex spouse as beneficiary on my IRA or 401(k) in Texas?”
Often yes for many plans under Texas law, unless one of the § 9.302(a) exceptions applies.
But for ERISA-governed employer plans, federal preemption can change the analysis.
“What if I still want my ex spouse to receive the account?”
Then do it cleanly. The safest route is usually a post divorce redesignation (a new beneficiary form after the decree) or clear decree language that aligns with the plan’s rules. 9302 Pre-Decree Designation of …
“If the institution already paid the ex spouse, is it over?”
Not necessarily. The payor may have protections, but payment does not always end the dispute, particularly where waiver language, constructive trust theories, or ERISA-related federal common law issues are in play.