Dividing a Variable Annuity in a West Virginia Divorce Settlement

When going through a West Virginia divorce, dividing assets can be a complex and challenging part of the process. One particular asset that may need to be divided is a variable annuity. In this blog post, we will discuss what variable annuities are, how they are valued, and the steps involved in dividing them during a divorce settlement.

Understanding Variable Annuities and Their Value

Variable annuities are a type of retirement savings plan that acts like a personal investment tool. They are so common that they are part of many Americans’ retirement portfolios now. When you get a variable annuity, the insurance company agrees to make regular payments to you based on a predetermined schedule. You either make one payment to the company or a series of payments. What you ultimately receive depends on how well your investment choices do. Most variable annuities invest in money market instruments, stocks, and bonds. On top of the monthly payments they pay out, variable annuities also offer a death benefit.

Because of their ability to fund your retirement on an ongoing basis and provide for your beneficiary, variable annuities can be highly sought-after assets during a divorce.

Asset Division in West Virginia

When a couple decides to go their separate ways in West Virginia, the law requires that everything they own together must be divided fairly. This doesn’t always mean splitting things exactly down the middle, but rather, deciding on a division that is just and reasonable. Assets that were gained during the time they were married are usually considered marital property and include everything from houses and cars to savings accounts and retirement accounts.

Numerous factors come into play. These include how long the couple was married, the financial condition of each person after the divorce, and how much each person contributed to the marriage. This approach aims to ensure that both individuals can move forward on somewhat equal financial footing.

Valuing and Dividing a Variable Annuity in Divorce

In a divorce, figuring out the worth of a variable annuity and how to split it between both parties is a crucial step. First off, it’s essential to find out the current market value of the annuity. This step might sound simple, but the fluctuating value of a variable annuity can complicate it. Furthermore, you also have to consider fees, tax implications, and the potential of the fund to perform better or worse in the future.

After knowing what it’s worth, the next challenge is deciding how to fairly divide it. Courts have a couple of ways to do this. Sometimes, they might give the annuity to one spouse entirely, balancing this by giving the other spouse different assets of equal value. In other cases, the variable annuity is divided in an equitable way and the party receiving part of it will need to roll their share of it into a new retirement account.

Tax Implications to Consider

It is crucial to divide a variable annuity as part of your divorce agreement to avoid unnecessary financial penalties and tax consequences. For example, if a couple divides a variable annuity outside of their divorce as an under-the-table agreement, they will likely be hit with a 10% withdrawal penalty and have to pay income taxes on the amount withdrawn. But if the transfer is done via a qualified domestic relations order, the couple can avoid these consequences.

There may be tax implications to consider in the future, and both parties should be aware of their responsibilities and rights when they accept a retirement account as part of a divorce. You should know about any ongoing fees or taxes you need to pay. This is why we often recommend working closely with a qualified financial planner as part of your divorce; you don’t want to lose part of your wealth to avoidable fees and penalties.

Contact Pence Law Firm Today to Start Your Claim

Preparing for divorce in Charleston? The team at Pence Law Firm is here for you. Give us a call at 304-345-7250 or get in touch with us online to set up a consultation. We’re here to learn more about what you’re looking for in your divorce and what you want life to look like moving forward.