What to Know about Retirement Account Assets and Divorce in Virginia
Spouses who decide to get divorced in Virginia need to know that pensions are one of the financial assets that may be affected by the divorce. It’s what’s known as a “defined benefit” retirement account, and the courts also look at other retirement accounts like 401K, IRA, and 403b plans, which are contribution plans. If you’re considering filing for divorce and you have retirement accounts, it’s important to retain an experienced Virginia family law attorney. You need someone who can accurately assess retirement assets and provide you with an idea of what to expect during the divorce proceeding.
How Does Virginia Split Pensions?
Virginia considers any pension to be marital property if the money was earned while you and your spouse were married. There are several ways the courts can split a pension that falls under marital property. You can divide after valuation, which means the pension present value is calculated, typically by an expert of some sort. Then, the spouses can incorporate the eligible portion into the overall asset distribution valuation. You can also divide it at retirement. When the spouse with the pension retires, he or she will pay the non-employee their share. This is done through a Qualified Domestic Relations Order (QDRO) that is submitted to the court and outlines how the pension will be divided. The QDRO may also help offset some tax penalties or fees that may be associated with withdrawing or changing a retirement account.
If spouses determine an alternate method of distribution and both agree to it, they are not obligated to use the aforementioned methods.
Division of Defined Contribution Plans
With defined contribution plans, employers and employees contribute a percentage or a specified amount of a paycheck every month. The money is put into an account until the employee decides to retire. If one spouse has contributed to something like an IRA or 401K, the courts will take a few factors into consideration when determining how to divide its value.
First, the court looks at how long the couple was married. If you were married for 10 years and you contributed to your 401K for 15 years, the court would consider the 10 years marital property and protect the five years of individual contributions under your separate property. Virginia courts, but law, cannot award more than 50 percent of the marital value to the non-employee spouse. Using the example above, if the court determines the non-employee spouse deserves a full 50 percent, he or she would receive five years’ worth of contributions and may further award the contributions plus or minus any gains and losses
Retaining a Virginia Divorce Attorney
If you or your spouse have significant retirement assets, it’s crucial to retain the right Leesburg divorce attorney. A small error can create big consequences in some situations. Also, there may be unexpected factors that develop, like the other side claiming that part of a military pension is shielded from distribution due to disability. The team at Whitbeck Cisneros McElroy PC specializes in complex family law matters, including divorce with high-value assets. Contact us online or call our office at 703-997-4982 to schedule a consultation.