Today, we’re going to be talking about the types of retirements that are often at play in a West Virginia divorce. Generally, there are two main types of retirements that you’re going to be dividing in a divorce action. One is called a defined benefit retirement and the other is called a defined contribution retirement. Generally speaking, what will happen in a divorce is if you present it to the judge, if everything else is divided equally, those retirements are generally going to be divided equally. Here are some of the basics about the difference between the two. A defined benefit retirement is a little less common nowadays and a defined benefit retirement is one in which somebody is going to get a fixed amount for their retirement, for the rest of their lives.
They build up that retirement account and they don’t get a pay out, but once they retire, they’re going to get that fixed payout and then when they die, it just goes away. That’s a defined benefit retirement. That’s generally how even social security works or an annuity sometimes works. Those are types of a defined benefit retirement. The other type of retirement is a defined contribution retirement and this is one where you make contributions. You invested in the market and it grows over time. There’s an actual value to that to it that can be easily determined. Let’s say you put money away and it builds up as time goes on, it builds up to the point where it’s worth, let’s say $500,000 for example. When at retirement age and you have that, most people will just try to withdraw a little bit at a time out of that.
This is a lot different than a defined benefit retirement. Now what will happen with the defined benefit retirement is that the spouse is entitled to the share of the retirement that was built up during the marriage. Generally speaking, what a court will do is if everything else is divided equally, then the benefits are going to be divided evenly. Let’s say that you have a defined benefit plan and the portion built up from the date of marriage to the date of separation is the amount the courts will look at dividing. Let’s say that at that point in time when they separate, the person would be receiving $2,000 per month.
What will happen is it will be divided and the other person should receive half that. That’s in simple terms what would happen. Let’s say that you have a defined contribution retirement plan and whenever you separate, it’s worth 500,000. Well, if it’s worth 500,000 and that’s the part that was built up during the marriage, then what’ll happen is the other spouse will get 250,000. There’s a way to do it so that you can actually separate out the retirement without there being any kind of tax consequences.
Generally speaking, the funds can be divided and you can divide it out without there being any kind of tax consequences or without there being any kind of penalties at all. Usually you need an attorney to be able to get that done since this is a tricky subject. This sums up the 2 different accounts that you may be dealing with and some suggestions for you to make your West Virginia divorce easier.
