In a Virginia divorce, some property is easier to divide than others. Furniture can be divided simply by each party taking what he or she desires, provided both parties agree. No special document outside of the divorce decree or property settlement agreement is needed.
The property division is a little more complicated with real estate, vehicles and retirement benefits. With a 401(k) retirement account, the matter becomes more complex. In Virginia, a 401(k) is subject to division in a divorce, even if only one party contributed money to the account. A court may award all or a portion of the account to the other party. Since the account is often one of the larger forms of marital property, a judge awarding a portion to the other spouse is common.
When the account is divided, special care must be taken to avoid extra taxes. Under IRS laws, a division of the account may be considered a taxable event if done incorrectly. The split of the account must be through a separate court order referred to as a Qualified Domestic Relations Order, or QDRO. The order must have specific information, including identifying information of both parties, the name of the plan, account numbers and other information.
In addition, retirement plan administrators often have specific language required for their plan. When the QDRO meets the requirements of the plan administrator, it will create a separate account for the recipient. The transfer will then take place.
Experienced family law attorneys may check with a 401(k) plan administrator for the plan’s requirements before preparing a proposed QDRO. This practice helps avoid post-divorce delays. When faced with a divorce where retirement accounts are at issue, a consultation with an attorney may prevent problems in the future.
Source: Code of Virginia 20-107.3 ‘Court may decree as to property and debts of the parties.”