Backyardchickens.com (We know you don’t believe us, but it exists) offers helpful advice on getting your chickens to lay their eggs in their nest boxes, and the secret lies in putting fake eggs where you want the chickens to lay real ones. This is the origin of the term “nest egg,” because once you start the golden egg-laying, it does not stop. A little investment at the beginning of your career can lead to a healthy retirement pension years into the future. Unless. Unless divorce gets in the way. What of your 401(k), 403(b) or other pension accounts?
Can Your Wife Take Your Retirement?
The kindly old legislators who over the years have added so generously to the Code of Virginia made sure to consider nest eggs along with all their other little laws. Locked within § 20-107.3 is this small nugget about pensions:
“The court may direct payment of a percentage of the marital share of any pension, profit-sharing or deferred compensation plan or retirement benefits, whether vested or nonvested, which constitutes marital property and whether payable in a lump sum or over a period of time.”
Your pension earned during marital years is considered marital property. Similarly, your wife’s pension is also marital property (because you each materially contributed to each other’s earning power and ability to keep a steady job).
Retirement accounts, pensions, annuities and such devices all fall within the scope of § 20-107.3, and as such are subject to a 50 percent split under subsection G(1) of that section. Your ex-wife can never get more than 50 percent of your pension (and you cannot get more than half of hers), but she can get less.
My Plan Was Started Before Marriage … Is It Marital or Separate?
The tricky part with calculating retirement plans, pensions and annuities is valuing the asset for the time you are married. Say you begin contributing to a plan at age 20, work for five years, then get married. Your marriage lasts 10 years. You are now 35, and have contributed to your pension for 15 years. In performing a valuation for divorce, though, your wife will only have a share of 10 years’ worth, not the first five years, since that portion is separate property. It is yours alone.
The value (including contributions, gains and losses) for the 10 years has to be calculated, so she gets 50 percent of those 10 years’ worth only. This is why the process is very complicated, since your investments may have skyrocketed during those first five years, then underperformed over the next 10 years. She is entitled to a portion of the portion that underperformed.
Can My Wife Receive Less than 50% of My Investments?
Though the general idea is to divide assets equitably, some details cannot be overlooked. First, the judge has some leeway in deciding what is equitable, since many factors may have contributed to both the earnings and the divorce. Issues like these are spelled out in 20-107.3 subsection E:
- Duration of the marriage
- Ages and physical and mental condition of you and your wife
- Circumstances and factors that contributed to the dissolution of the marriage, specifically including any ground for divorce
The subsection ends with our favorite catch-all factor, “Such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.”
That last clause allows a judge to adjust apportionment downward from 50 percent.
Defined Contribution and Defined Benefit
Retirement accounts generally fall into two groups:
- Defined contributions — You set aside a specific amount every paycheck or every month, and the financial markets in their unpredictable natures return what they will to you in retirement; these are 401(k) and 403(b) accounts, IRAs, and similar risk-bearing instruments
- Defined benefits — The plan administrator guarantees a certain steady income from the plan for the retired employee; these are pensions
Valuation of defined contribution accounts are easier than valuation of defined benefit accounts, since all the numbers are known quantities. The property settlement agreement can define the portion you will give to your ex-wife.
Since a defined benefit has a calculable value, often the two attorneys and judge will use an actuary to determine the current value of a pension and use that figure for property division. The other option is to hold the pension until retirement, and then pay the non-employee’s (ex-spouse’s) share to her or him. In either instance, you will likely need to file a Qualified Domestic Relations Order (QDRO) that legally notifies the company issuing the pension how the asset is to be divided.
We Protect Your Rights as a Man!
As you can see, planning the equitable division of pensions, annuities and other retirement vehicles is not for amateurs. Enlist the aid of your tax advisor and financial planner. Most important, ask plenty of questions of your divorce attorney as any property settlement agreement is being drawn up.
When you call 757-383-9184 to speak to a Virginia family law attorney, you get accurate, up-to-the-minute advice on divorce, finances, and your rights. We specialize in safeguarding the rights, securing the nest eggs, and protecting the financial security of our male clients. Contact us online or come by our Virginia Beach office today.