How Are Retirement Accounts Split During a Virginia Divorce?
By: John Whitbeck
[08.31.2020] Dividing financial assets is one of the most complicated and contested aspects of a divorce. Those assets that may be split during a Virginia divorce include retirement accounts.
Virginia family law has specific procedures to ensure the fair division of pensions, 401(k) plans, as well as Individual Retirement Accounts (IRAs). Virginia courts value those retirement accounts as either separate property, marital property or a combination of both.
Which Retirement Accounts Are Considered Marital Property?
Typically, retirement accounts established during the marriage are considered marital property and are split between spouses in a divorce. Most retirement accounts are broken down into two types:
- Contribution plans (IRAs, Thrift Savings Plans (TPSs), and 401(s) plans)
- Defined benefit plans or pensions
Generally, these two types of retirement accounts are viewed by Virginia courts as marital property, even if the accounts are in the name of one spouse.
How Are Contribution Plans Divided in a Virginia Divorce?
For contribution plans, both employees and employers contribute a predetermined amount or a percentage of a paycheck every month. These funds go to an account. Employees accumulate these account funds until they go into retirement.
When an employee spouse contributes to a contribution plan – such as a 401(k) plan or any other – during the marriage, Virginia courts will consider several factors when splitting the retirement account in question. However, the maximum a spouse can get of the other spouse’s retirement account is 50% of the marital share of the account. “Marital share” means that portion of the total value of the account that was earned during the marriage
How Are Defined Benefit Plans Divided?
Defined benefit plans, aka pensions, can also be split between spouses during a Virginia divorce. A spouse may have a pension from serving in the military, being a union member, or working for the federal or state government.
Employers contribute a set amount of funds to their employee’s pension based on a special formula. The employee gets access to the account upon retirement. When dividing defined benefit plans, Virginia courts or spouses who opt for mediation may choose to:
- Calculate the value of the plan. A common way to split a pension between spouses is by having the account’s present value calculated by an expert. After the valuation has been completed, the non-employee spouse may choose to incorporate his or her share into the overall value of asset division.
- Divide upon retirement. Virginia law also allows parties to agree to divide the shares on their own. At the time of retirement, the non-employee spouse’s portion will be paid to him or her. To divide a pension upon retirement, the divorcing spouses need to submit the appropriate Qualified Domestic Relations Order (QDRO) to the court.
Spouses can also agree to an alternative way to divide a retirement plan between them. Having a divorce attorney can help ensure that the method of distribution meets your individual needs. If you are going through a divorce in Virginia and need assistance with your financial assets, contact WhitbeckBennett by calling 800-516-3964 or email email@example.com.