Virginia Divorce Law: How to Handle Government Retirement Accounts

If you work for the federal or state government, your divorce is going to be more complicated. As discussed in another blog, every asset from the marriage gets divided in a divorce. This includes retirement accounts.

Government workers have special kinds of retirement accounts. Federal workers may be FERS or TSP eligible. State workers may have a VRS plan. Either way, it is important to know that these plans are more complicated to divide.

So what makes these plans more complicated, and how are they treated in a divorce?

Types of Plans: Defined-Benefit AND

Defined-Contribution

There are several major types of retirement plans. Each type of plan is treated differently. Two of the major types of plans are defined benefit plans and defined contribution plans. For more information on the pros and cons of each type of plan, you should consult with a Certified Financial Planner or another type of financial advisor to understand what kinds of plans will work best for you in retirement.

In the divorce context, a defined contribution plan is essentially a deferral of wages. You may make contributions to the plan over an extended period of time through your wages. Your wages get placed in an account and gain interest over time. Upon retirement age, you are then eligible to start receiving the benefit of that account. A TSP would be an example of a defined contribution plan.

A defined benefit plan is essentially a pension. Your employer will pay you a pension over a certain period of time based upon your time in service and the nature of your employment. A FERS would be an example of a defined benefit plan.

How Do Retirement Accounts Get Divided in a Divorce?

FERS and TSP accounts get divided differently in divorce cases. With respect to a TSP, the Court will simply divide the amount of contributions made between the date of marriage and the date of separation. The spouse, or in this context the Alternate Payee, will receive those benefits under a Qualified Domestic Relations Order.

In contrast, a FERS account does not get paid out the same was a TSP. You cannot roll over a lump sum payment from a FERS account. Your spouse will receive a portion of your monthly benefit. The typical method of calculating the amount of monthly benefit paid directly to your spouse is handled mostly by the plan administrator. The plan administrator takes the “present value” of the account and multiples it by a fraction. That fraction is essentially the amount of time you have worked for the government during the marriage as the numerator, over the total amount of time you have worked for the government expressed as a denominator.

Why You Need a Divorce Lawyer

The division of retirement accounts is one of the most complicated aspects of divorce cases. Improperly calculating benefits can lead to thousands of dollars of lost marital assets. Plan administrators are also very particular about the preparation of the Qualified Domestic Relations Orders. You need to hire a lawyer to make sure these retirement accounts are handled correctl

Virginia Divorce Law: Understanding Qualified Domestic Relations Orders

If you are getting a divorce and you have retirement accounts, you need to know about Qualified Domestic Relations Orders (“QDROs”). These documents are important because your retirement company may require these documents in order to divide your retirement accounts. Not all retirement accounts are covered, so it is important that you understand the basics. If you fail to handle the QDRO correctly, it can result in thousands of dollars of damages for your mistake.

So what is a QDRO, and why do you absolutely, positively need a lawyer for one?

What is a QDRO?

A QDRO is a document required by federal law to divide a retirement account. It is an additional piece of paper that is filed with the divorce court and signed by the judge. The document authorizes your plan administrator, the person responsible for your retirement account, to distribute funds.

What Types of Retirement Accounts Require a QDRO?

There are only certain types of “qualified plans” that require a QDRO. Other types of plans, such as government pensions, may require other types of documents such as an ADRO. A QDRO is specifically designed to address The most common types of plans that require a QDRO are 403(b) and 401(k) plans. IRAs are typically not divided through a QDRO. Government pensions are also not often divided by QDRO.

What Is The Process For Preparing a QDRO?

A QDRO is a highly technical document. It is a document that is relied upon by accountants to tell them exactly how to calculate your share of your spouse’s retirement accounts. As such, there are several specific provisions in the QDRO that may be unique to individual plans. A lawyer will typically obtain the template QDRO from your plan administrator and make substantial changes based upon what is ordered by the court or agreed by the parties for division of the retirement accounts. The template often does not cover exactly what you need.

Why You Absolutely, Positively Need a QDRO Lawyer.

There are a lot of pitfalls in preparing a QDRO. There are complicated concepts such as gains, loses, market performance, loan accounting, and valuation dates that can trip even lawyers up. If you are not careful about which options you select in a QDRO, it can snowball into a massive accounting mistake. Even checking one simple box wrong could lead you to be responsible for a massive deficit or even a large tax bill.

That is why it is important to do a QDRO right the first time. Under no circumstances should you ever attempt to handle a QDRO alone. Even when it comes to lawyers, you need to make sure your lawyer has handled QDROs before. Many divorce lawyers refer QDROs out because of how complex and dangerous they can be. If you have retirement accounts and are getting divorced, talk to a qualified lawyer.

Virginia Divorce Law: The Problem with DIY Separation Agreements

If you have started the divorce process or are just now thinking about whether you want to begin, it is important to understand the dangers associated with a do-it-yourself (“DIY”) divorce. As I have written about in a separate article, the two major types of divorces are contested and uncontested divorces.

If you are pursuing an uncontested divorce, you will likely need a separation agreement. So what is a separation agreement, why do you need one, and what could go horribly wrong if you DIY?

What is a Divorce Separation Agreement?

This is a document that explains to the court what you and your spouse would like to do with everything that was acquired during the marriage and how you are handling custody and visitation of any children. To qualify for an uncontested divorce, you must fully resolve all these issues. 

You and your spouse will need to agree on how to handle things including, but not limited to, life insurance policies, health insurance, debt, bank accounts, stocks, bonds, vehicles, jewelry, retirement accounts, pets and real estate. You will also need to handle where the children will live and how often the other parent will get to see the children.

Why Do You Need a Divorce Separation Agreement?

If you do not have an agreement in place of some kind, then you must do a contested divorce. These can be terribly time consuming and expensive. You will be required to obey several rules and file the appropriate paperwork with the court or risk losing your case.

Without a separation agreement, you may also run into arguments on how to handle your property. You may have thought you had an agreement on who would handle a certain credit card bill, but without something in writing you risk a dispute. Therefore, it is important to have an agreement in writing.

What Could Go Wrong if you Don’t Hire a Lawyer to Draft the Separation Agreement?

I have seen too many people attempt to create a DIY Separation Agreement. Common examples of issues that go wrong include a) not identifying how retirement accounts will be divided, b) not identifying how real estate is going to be sold and c) not being clear enough in how custody and visitation schedules are going to work.

If you are not clear, you will have a lawsuit. These are complicated matters with plenty of potential loopholes that could get you trapped in court for years. It could hold up the sale of your property and cost you thousands of dollars. It is cheaper to hire an attorney to get it right the first time than try and hire a lawyer to fix the bad DIY job later.

Therefore, make sure you talk to an attorney if you are considering a divorce so you can get a separation agreement that meets your needs and protects you down the road.

Virginia Divorce Law: The Value of a Request for Admission

This blog is the third in a series of blogs that talk about “discovery” in a divorce case and how it can be used to help your case. I have previously discussed depositions and interrogatories, and what role those play in a divorce case. The third type of discovery is known as a request for admission.

So what are requests for admission, and how can they be used to help your divorce case?

What is a Request for Admission?

A request for admission is a type of discovery that usually takes the form of statements. A common example of a request for admission would be, “admit that you had an adulterous affair with [insert name].” There are many different types of requests, and they can perform a wide variety of roles in a divorce case.

In a divorce case, you are addressing issues such as custody, money, and property distribution. A well drafted request can address any one of these areas. You are able to ask a total of thirty (30) requests for admission. If you want to have more than thirty (30) requests, you must get permission from the court first.

How to Use a Request for Admission in a Divorce Case.

Whoever is asked a request for admission must answer one of two ways; a) admit that the statement is true or b) deny that the statement is true. If you fail to answer a request for admission within twenty-one (21) days, then any statements in the requests are presumed to be true.

This can act as a massive benefit in a highly contested case or a massive danger. For example, if there is real estate you do not think the other side is entitled to, you can send a request stating “admit that the property located at 111 East West Street is not marital property.” If that request is not answered, then that could seriously harm the other side.

You can also use a request for admission during the trial of the case. If someone changes their story in front of the court, you can bring out the requests and use their admission to combat their story.

Why You Need a Divorce Lawyer.

Effectively using a request for admission can be difficult. It is important to use your limited number of requests for admission appropriately. If you ask the wrong questions, then you won’t be able to ask any more important questions. Furthermore, it is important to understand how to answer a request for admission if you receive one. Inappropriately answering a request for admission may result in your entire case being decided against you. Therefore, make sure you hire a lawyer in a contested divorce case.

Virginia Divorce Law: The Value of Interrogatories

This blog is part of a series of blogs designed to help you understand how the discovery process works in Virginia. The first of the series was Virginia Divorce Law: The Value of Depositions. There are four (4) major types of discovery tools; a) depositions, b) interrogatories, c) document requests and d) admissions.

The second type of discovery is known as interrogatories. So what are interrogatories and how are they best used?

What Are Interrogatories?

Interrogatories are the process by which you can ask the other side questions under oath without having to go through the Court. Under oath means they have to answer your questions truthfully. If someone lies on interrogatories, they can get in serious trouble. Common examples of a divorce interrogatory include a) identifying all the property your spouse claims they should have, b) identifying the custody arrangement your spouse is asking for and c) asking for all the evidence that your spouse intends to use at trial.

What Can Interrogatories Be Used For?

There are three main reasons to use interrogatories. The first reason to use interrogatories is to get an idea of what your spouse intends to tell the court and what witnesses they intend to use. That way, you can plan how to respond to their arguments with your own witnesses and evidence. The second reason to use interrogatories is that you can use statements in interrogatories to break down the testimony of your spouse at trial. If their statements are contrary to what is in their interrogatories, then that can be used to weaken their credibility. Finally, interrogatories can be used to encourage settlement discussions. By knowing the strength of your spouse’s case, you can submit a reasonable settlement proposal.

Why You Need a Divorce Lawyer?

A divorce lawyer can help you effectively utilize interrogatories to get the most out of your discovery. It is important to hire a divorce lawyer to ask the right questions and to ask them at the right time to get the best possible result in your case. Therefore, make sure you hire a divorce lawyer to represent you in contested cases.