In Virginia, in the event of a divorce, courts follow the equitable distribution method of dividing property. Under equitable distribution, courts will divide property “equitably,” or fairly, between spouses, but not necessarily evenly. The property division process can be complex and have significant financial consequences, especially if a couple has high net worth.
Marital vs. Separate Property
In Virginia, a couple’s property upon divorce is classified as marital, separate, or part marital and part separate. Marital property is jointly-owned property and other property (other than separate property) obtained from the date of marriage through separation. Marital property is subject to equitable distribution during a divorce proceeding. Separate property is all property acquired by one spouse prior to marriage and property obtained during marriage by inheritance or gift (other than a gift by a spouse). Gifts from one spouse to another are marital property.
If an asset is part marital and part separate property, special classification rules apply to determine which portion of the asset is marital and which is separate. Only the marital portion of mixed assets are subject to equitable distribution. Courts will also classify and divide any marital debt the same way as marital property.
When dividing assets during a divorce, many factors are considered, including:
- The contributions, monetary and nonmonetary, of each party to the well-being of the family;
- The contributions of each party in the acquisition and care and maintenance of such marital property of the parties;
- The duration of the marriage;
- The ages and physical and mental condition of the parties;
- The circumstances and factors which contributed to the dissolution of the marriage;
- How and when specific items of such marital property were acquired;
- The debts and liabilities of each spouse, the basis for such debts and liabilities, and the property which may serve as security for such debts and liabilities;
- The liquid or nonliquid character of all marital property;
- The tax consequences to each party; and
- The use or expenditure of marital property by either of the parties for a nonmarital separate purpose or the dissipation of such funds in anticipation of divorce or separation;
Non-monetary contributions, as mentioned above, include homemaking, child-care services, and other unpaid work. Courts can also consider other factors deemed appropriate to reach an equitable distribution. It’s important to note that “equitable distribution” does not necessarily mean equal. Courts aim to reach a fair division, but not necessarily an equal one.
Often, retirement accounts, such as pensions, will be part separate and part marital. The marital share of a pension is the portion earned during the marriage and before separation. Any portion earned before marriage or after separation is separate property. The court can award a percentage of the marital share of any pension or individual retirement account, whether vested or nonvested, which constitutes marital property to the non-employee spouse. Under Virginia law, a court can’t award more than 50% of the marital share to the non-employee spouse. Division of military retirement assets subject to special rules.
If the employee spouse is already receiving pension payments, the payments to the non-employee spouse generally begin upon divorce. However, the court can also order direct payment of the awarded percentage of the marital share by direct assignment to a spouse from the employer trustee, plan administrator or other holder of the benefits, as the benefits become payable. This means that if the employee spouse is still working and not yet receiving retirement benefits, there will be no payment of retirement assets at the time of divorce. Instead, the court order will be sent to the retirement plan administrator and when the employee spouse retires, the plan administrator will send the relevant shares to each respective spouse.
Property Settlement Agreements
Upon a divorce, spouses can enter into a property settlement agreement setting out the terms of their separation, including the rights, interests, and obligations of the spouses after the divorce. The agreement will typically establish what assets the parties classified as marital or separate and which spouse will receive which assets, or a portion thereof, after the divorce. The agreement should also address how the marital debts will be divided amongst the spouses.
Property Settlement Agreements also usually include important terms related to the divorce, such as the date of separation, tax matters, and a clause indicating a no-fault divorce, which prohibits either spouse from filing for divorce on fault grounds. Additionally, property settlement agreements can cover issues that the court doesn’t have jurisdiction over, such as private school and college education expenses.
In addition to property issues, settlement agreements also establish the parties’ agreement on other important divorce related issues, such as custody and visitation, child support, and spousal support. However, it’s important to note that even if an agreement established child support, custody, and visitation matters, the agreement must be found to be in the best interests of the child and approved by a judge.
Property settlement agreements are also required for couples wishing to file for an uncontested divorce or to shorten the required separation period before divorce from 1 year to 6 months.
Family law attorneys at General Counsel, P.C. are experienced in all aspects of property division, including negotiation and drafting of property settlement agreements. Call us today so we can help you protect your interests.