A Virginia divorce will mean major changes to someone’s daily life and financial adjustments as well. Some couples already have written agreements that make it very clear how they will divide their property when they divorce. Others will need to negotiate a settlement with one another or prepare for litigation.
When property division matters go to court, a judge will review an inventory of marital assets and then apply the Virginia equitable distribution law based on their understanding of a couple’s marital circumstances. Certain assets can be harder to divide appropriately than others, and retirement accounts are often a source of anxiety for those preparing for divorce.
At least some of the savings are likely subject to division
Unless one of the spouses specifically earmarked their retirement savings as separate property, at least some of the account’s balance will be subject to division. One of the first steps for property division negotiations or court preparation involves establishing how much of the account is marital property. Contributions made prior to the marriage remain separate property, but whatever someone or their employer contributed to the account during the marriage is likely subject to division.
If the spouses are not yet old enough to retire, then withdrawing funds directly from the account might trigger taxes or penalties. Thankfully, it is possible to have one of the lawyers working on the divorce draft a qualified domestic relations order (QDRO) that can split the account without generating those penalties.
Once a lawyer puts together the QDRO and has the courts approve it, the spouses can submit that document to the business or professional managing the retirement savings for the household. They will create a second account for the other spouse and deposit a specific percentage of the account’s balance into that secondary account. So long as spouses follow the correct process, they will not have to worry about losing some of the balance of their savings to taxes or penalties.
Of course, many people worry about what splitting their retirement savings might mean for their future financial stability. They may happily give up other resources to retain the retirement account without dividing it.
Understanding what happens with retirement savings during the Virginia divorce can help people push for the most reasonable property division terms for their situation.