There is a common misconception that divorce is most common among young couples who simply got married too young. However, the truth behind that isn't so simple, as divorce is becoming more and more common among older couples. In fact, according to a recent article from Forbes, one in four divorces occurred among those over age 50. When couples who have been married for a long time decide to divorce, dividing assets can get complicated. Virginia residents will need to consider how certain accounts, such as pension plans and retirement accounts, will be handled in the divorce settlement.
As a general rule, money in retirement funds that was added during the marriage is considered marital property. However, if funds were put into the retirement account prior to the marriage, those funds are generally considered separate property rather than marital property. The funds that are put into the account during the marriage will be divided amongst both spouses in the divorce settlement. When it comes time to divide these assets, it is critical that you ensure the settlement specifically and very clearly outlines how the divide will happen.
Many pension plans as well as 401(k) plans will require a specific court order known as a QDRO, a Qualified Domestic Relations Order, in order to be divided. This order ensures that no penalties are drawn when funds are taken from the account while providing details regarding the division. It is critical to ensure that this order is prepared accurately and efficiently because it must be presented before the divorce has actually been finalized. This helps to ensure no costly mistakes are made.
Virginia residents who are going through a divorce know how many issues need to be addressed before the process can conclude. It can be stressful, but when the proper steps aren't taken to ensure your financial future, it can make the future more challenging. Being complete and thorough in your preparation can lead to a more stable financial life post-divorce.
Source: Forbes, "How Divorcing Women Should Handle Retirement Accounts and Pension Plans," Jeff Landers, June 13, 2012