When people in Virginia get a divorce, a retirement account may be one of the main assets they have to divide. How this is done depends on the type of account it is.
If an account is considered to be what is known as a “qualified plan,” which includes a 401(k) or defined benefit, it may require a document called a qualified domestic relations order, or QDRO. Without a QDRO, a person would have to pay taxes on the amount he or she withdraws from the retirement account. Furthermore, there would be a 10 percent early withdrawal penalty without this order in place.
An IRA is handled differently. A QDRO could be used on an IRA to avoid taxes, but it is not required. Even if a couple has a QDRO, it would not protect them from the 10 percent early withdrawal penalty. People would have to pay this penalty on IRAs and other types of retirement plans if they made a withdrawal before the age of 59½.
The division of property does not end with a retirement account. Other assets that might need to be split up that may cause complexities include a house and a business. In the case of a house, one person might buy out the other one, or a couple might sell the home. If one or both parties own a business, the first step might be getting a business valuation. As with a home, a business could be sold or taken over by one person. However, these solutions could present further complications. For example, it might take some time to sell either asset, or a couple could lose money on the sale. Couples might face holding onto assets for some time until the market is better for selling. An attorney might be able to help a person review the options and potential solutions.