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Property Division: Pensions
The portions of pensions "earned" during the marriage (prior to the final physical separation) are marital property. In Virginia, there does not have to be a "buy-out" by the spouse possessed of the pension; if a Court settles the matter, the other spouse can receive his or her "share" only "if, as and when" the other spouse receives the pension benefits; and fifty percent of the amount received at any one time is the statutory maximum which can be awarded (this is also the approach of the military "Former Spouses Protection Act" and of Acts applicable to Federal agencies, in terms of the maximum which the Secretary of the Service or Agency is authorized to pay directly to the other spouse). In addition, the problematic issue of "capping" the amount received by the other spouse, by means of "present value" determinations of the portion of the pension earned during the marriage, has largely been solved by addition, a couple of years ago, of a provision which permits "if, as and when" awards based on the "marital portion" formula; i.e.:
The actuaries have not been fully divested of their livelihood in this area, however. "Present value" determinations may be necessary if both spouses have pensions earned during the marriage (in order to prevent the unwieldy result of each paying a portion of his or her share to the other); or where one spouse nevertheless desires, at least in effect in the property division process, to "buy out" the interests of the other.
Because fifty percent of the amount ("if, as and when") received is the statutory maximum, at least with respect to annuity-type retirement benefits (i.e., those which entail monthly installment payments after retirement/after a certain age, etc.) -- initially, the thinking and approach of some practitioners was that something less than fifty percent must be "the norm" here (even to the extent that annuities constitute "marital property"; i.e., even regarding the "marital portion"). Often, perhaps by analogy to "dower" interests, they viewed one-third as the "usual" spousal share in an annuity; with a fifty percent share being reserved for application against the spouse clearly "guilty" of dissolution of the marriage. Even in the case described above, however, where the Court of Appeals indicated that mere "personal fault" was essentially irrelevant (and the ex-wife was denied permission to prove that her ex-husband had dissolved the marriage by means of engaging in adulterous relationships with seven different women!) -- an orthopedic surgeon was allowed to retain all but 20-30 percent of certain types of his (marital property) business assets. And, although the Virginia Court of Appeals has never directly decided this issue, several early "reported" decisions have involved cases where that seems to have been the approach taken ( i.e., precisely or about one-third viewed as the "norm").
On the other hand, a substantial percentage of practitioners seem not to distinguish retirement (as opposed to) business assets in this fashion; at least in the Northern Virginia area, increasingly, our Judges are ordering the "marital portions" of these assets, also, simply divided equally.
Another possibly important caveat regarding retirement benefits results from the tax effects of cashing in" IRA's and "401K"-type Plan amounts. That is, "early distribution" of these assets will result in a ten percent income tax "penalty" bite; and the amounts received must, also, then be included as income on your tax return. At the higher brackets, therefore, with Virginia State tax effects also considered, this means that the effective "present value" of what might otherwise seem to be $1,000.00 in an IRA or 401K account is really only a little more than one-half of that amount. And, although it is true that, with respect to Plans, such tax effects can be negated by means of use of the cumbersome procedure of a "Qualified Domestic Relations Order" ('QDRO') -- where the amount in the Plan is not to be divided that way now or in the future -- $1,000.00 in a 401K Plan may not be of equal value to $1,000.00 in, for example, an ordinary savings account.
In Virginia, a divorce may be granted on the no-fault grounds of living separate and apart without any cohabitation and without interruption for one year, or six months, if there are no children of the marriage.
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