All of your property, including retirement accounts, must be classified as either marital property or separate property when you get divorced in Virginia. Once the property is identified, each spouse keeps his or her own separate property, and marital property is divided according to the principles of equitable distribution.
Generally, retirement accounts are considered marital property even if the account is in one spouse’s name, but the division of retirement accounts isn’t always that simple.
Dividing 401(k)s, IRAs, 403(b)s, and Other Contribution Plans
In Virginia, 401(k)s, IRAs, 403(b)s, and other retirement plans are considered marital property. However, there are some specific rules about how these plans are divided during a divorce:
- Defined contribution plans are only marital property for the time that you are married. For example, if you have had a retirement account for 25 years and you’ve been married for 15 years, the 15 years’ worth of your contributions are marital property that may be divided during your divorce, and ten years is separate property that is yours alone.
- No more than 50% of your retirement account may go to your spouse.
Additionally, the rules of equitable distribution apply. Your spouse won’t automatically get 50% of your 401k or IRA. Instead, the court will consider things such as your standard of living, each spouse’s earning potential, each spouse’s retirement savings, and other factors before dividing your retirement accounts.
Defined benefit retirement plans, also known as pensions, are marital property and may be divided during a Virginia divorce. There are two options for dividing a pension. You may:
- Divide the pension’s current value. An actuary will calculate the present value of the pension, and this value may be part of the division of assets.
- Divide the pension’s value at the time of retirement. You may agree to decide how the shares of the pension will be divided now but to defer payment until the spouse with the pension retires. If both spouses agree to this, you must submit a Qualified Domestic Relations Order (QDRO) with the court describing how the pension will be divided at the time of retirement. A QDRO can help you avoid taxes and other pension-related penalties.
Dividing retirement assets can significantly impact your future. Accordingly, it is important to speak with your Virginia divorce lawyer about your priorities and how to achieve your goals. Call Stephen Bloomquest today to schedule an initial consultation to help ensure that your financial future is protected.