In Virginia, courts divide marital property equitably in a divorce. Virginia law defines marital property as all property acquired following the date of marriage and before the date of the last separation, including retirement accounts and retirement savings. There are exceptions for property acquired during this period if it is acquired through inheritance or gifted from a party other than the spouse, or if the property is an increase in value of property owned by one party prior to the marriage.
Aspects Of Separate And Marital Property
Many people believe that retirement accounts are separate property because the account is titled in only one spouse’s name or because the account existed prior to the marriage. This is not the case. However, retirement accounts started prior to the marriage or contributed to after the parties’ date of separation will likely include funds (property) that are part separate and part marital property, or referred to as hybrid. Virginia family law classifies the portion of retirement accounts contributed to prior to the marriage and after the parties’ separation as separate property. Additionally, increases in value to the separate portion are separate, and increases in value to the marital portion are martial. This can make the characterization and division of retirement accounts particularly complex.
Different Than Other Marital Assets
Even though retirement accounts such as 401(k)s, IRAs, and pensions may be considered marital assets, they are divided differently than other marital assets. While Virginia family law applies, there are other laws that may apply as well, including the Employee Retirement Income Security Act (ERISA) and, in the case of military retirement accounts, the Uniformed Services Former Spouses' Protection Act (USFSPA). Further, special court documents may be necessary to divide retirement accounts, such as a “qualified domestic relations order” or QDRO for private employer retirement benefits or an order acceptable for processing for certain government employee’s accounts. These orders are vital as they allow a tax-free rollover of retirement funds from one spouse to the other and the administrators of the accounts will not divide the accounts without the appropriate orders.
Special care must be given to cases involving the division of retirement benefits to ensure the proper court orders are entered and that the division of property is fair and equitable.