Whenever someone gets divorced, there are lots of questions that swirl around. For example, does a husband or wife have rights to their spouse’s pension? Perhaps you’re just looking for a knowledgeable divorce lawyer. Today, let’s look at what happens to 401(k)s in a divorce in the state of Virginia.
The Two Types Of Divorce Property: Separate And Marital
Under Virginia state law, there are two property types, separate and marital. Here is a look at the difference between the two.
Separate property is the property that one spouse acquired before the marriage began. For example, the wife had a home that she owned before marriage. Upon divorce, Virginia would still consider this home the wife’s property.
As the name suggests, marital property is the property that a couple acquires during the marriage. Both the husband and the wife have equal claim to it. If a husband and a wife started a joint savings account at their local bank after getting married, that account is marital property.
Are 401(k)s Separate Or Marital Property?
There are many ways retirement accounts are divided in divorce. As with many things in the divorce and legal process, how this happens depends on various factors. Specifically, it depends on the 401(k) account’s opening date and when the spouses were married. Here are some examples to help explain the issue in more detail.
Before he was married, James worked at GME Corporation. He was employed there for six years and then left that job for another before the wedding. James left GME Corporation with a 401(k) worth ten thousand dollars. Because this was all earned before the marriage began, this is one hundred percent James’s separate property.
Situation two is a little bit different. James once again worked for GME Corp—this time for ten years. Yet James started working there while he was married. He remained married the entire time he worked there.
James stopped working for GME Corp before the divorce occurred. His 401(k) account from GME is worth twenty-five thousand dollars. Because James grew the entirety of the 401(k) account during his marriage, the state of Virginia will consider it marital property. The spouse is entitled to up to fifty percent of the account balance, in this case, $12,500.
Finally, we’ll examine a more complex situation. This time, James worked at GME Corp for five years before being married, all the while contributing to his 401(k). Then James got married and continued working there for an additional five years, all while still contributing to his 401k.
Now James has left GME Corp, and his 401(k) is worth forty thousand dollars. In this scenario, the spouse gets ten thousand dollars. Assuming he was contributing the same amount to the account during his entire employment at GME, twenty thousand dollars would have been in the account before James got married (his separate property).
James would have contributed twenty thousand more dollars as marital property. The spouse is entitled to up to fifty percent of it, and in this case, half of twenty thousand dollars is ten thousand dollars.
Final Thoughts
Divorce proceedings can be stressful and complex. Many questions need answers, and many accounts and property types need examination. And we haven’t even begun to look at the issue of child custody. Before starting the divorce proceedings, it’s essential to have a qualified and knowledgeable lawyer to assist you through this challenging process.
