Virginia Retirement Accounts and Divorce Attorneys
Like other marital property, retirement accounts such as 401(k) and Individual Retirement Accounts (IRAs) are up for equitable division in Virginia divorces. While dividing the assets in a bank account is relatively straightforward, dividing retirement accounts is more complex, especially if there are penalties for dipping into an account before a certain number of years. Furthermore, there are specific rules regarding the division of certain retirement accounts if the couple has been married for a certain number of years. The retirement accounts and divorce attorneys at the Virginia Family Law Center are available to help if you are going through a divorce.
Equitable Division of Marital Assets
Virginia is an equitable division state, meaning all marital property is divided fairly, though not necessarily evenly. If a couple cannot agree between themselves, a court will intervene and divide those assets based on a wide array of factors, such as the length of the marriage, contributions that each spouse made to the marriage, the age and health of each spouse, and much more. The court’s goal is simply to “arrive at a fair and equitable monetary award.”
Various Types of Retirement Accounts and Funds
All assets acquired during the marriage are subject to equitable division under Virginia § 20-107.3.
- 401(k) accounts
- 403(k) accounts
- IRA accounts
- Roth IRA accounts
- Thrift Saving Plans (TSPs)
- Pensions
- Public Employees’ Retirement Association (PERA) accounts
- Trusts
- Profit sharing plans
- Stocks and bonds
- Mutual funds
- Money market accounts
Division of Defined Contribution Plans
When dividing 401(k), 403(k), and IRAs in which the spouse and their employee have made contributions over the years, the following will be taken into account: If an employee made contributions to the retirement account for at least 25 years and the marriage lasted at least 20 years, all contributions the employed spouse made before the marriage are exempt from distribution. For example, if the spouse contributed to the account for 25 years, those first five years would be exempt. Furthermore, the non-employed spouse cannot receive more than 50% of the fair market value of those retirement assets.
Two Options for Division of Pensions
According to Personal Capital, around 31% of Americans retire with a pension. During Virginia divorces, pensions are divided as follows:
- Divide Now—If the couple wishes to divide the pension now, the pension can be valued and included in the overall value of the marital assets to be divided.
- Divide at Retirement—Many couples wish to delay dividing the pension before retirement. This second option requires that both parties submit a Qualified Domestic Relations Order (QDRO) to the court, defining how the pension assets should be divided at retirement.
