Retirement plans may be among the largest assets held by a Virginia couple who decides to divorce. Dividing these plans during the dissolution of a marriage can be complex, and both parties may need to revise their retirement schedules after the division is complete. In most cases, retirement plans are considered assets that belong to the marriage. Of course, the length of the marriage and the duration of a retirement plan are also factors in this equation. People in longer marriages generally need to split more of their retirement funds, especially if the fund was only started after the couple was already married.
On the other hand, people in shorter marriages may only divide the portion of the retirement fund that grew during their years together. In some cases, both parties may have extensive retirement savings in their own name that need to be divided with one another. These types of plans have special tax regulations surrounding their use, so it is important to make sure that any division is executed correctly to avoid unwanted penalties. A Qualified Domestic Relations Order, or QDRO, is a court order issued after the divorce decree. It provides for the distribution of funds from a retirement account in line with the divorce settlement.
Division of retirement accounts can include rolling over those funds into another retirement account, such as an IRA. In order to complete an agreed-upon division, a QDRO is necessary to divide a 401(k) or other employer-sponsored plan, like a pension. IRAs do not require a QDRO for division; instead, the divorce decree or separation agreement may be sufficient.
For many people, retirement savings are among their most important investments addressed in their divorce. A family law attorney may represent a divorcing spouse in negotiations to achieve a fair settlement in the property division process.