Virginia Legal Trends and More: IRA Withdrawal Penalty is Dissipation of Marital Estate

IRA Withdrawal Penalty is Dissipation of Marital Estate

By Deborah Elkins
Published: May 3, 2011

Tags: Domestic Relations, Hanover County Circuit Court, Judge J. Overton Harris, Virginia Circuit Courts

A Hanover County Circuit Court says wife’s use of $17,180 from the parties’ IRA was for proper purposes such as payment for attorney’s fees, the children’s college expenses, car repairs and household expenses, but the $5,727 tax penalty she incurred for her early withdrawal of the IRA funds constitutes dissipation of marital assets for which husband gets a credit.

Both parties made significant monetary and nonmonetary contributions to the well being of the family and to the acquisition, care and maintenance of the marital property. The parties were married for approximately 27 years. Wife is 46 years old and husband appears to be in his 40s or early 50s. Both parties are in good physical and mental health appropriate for their ages and circumstances. The parties’ significant assets were acquired during the marriage; testimony indicates the parties have no debt. With the exception of evidence of the tax penalty incurred as a result of wife’s premature withdrawal from the parties’ IRA, the parties did not present evidence as to tax consequences.

Husband is required to reimburse wife for his share of their son’s medical expenses for the period of Nov. 16, 2009 to June 2010. Since wife has paid the son’s medical expenses from her separate funds, husband is ordered to pay his $752.88 directly to wife within 60 days of the final decree.

In April 2010, wife withdrew $17,180.99 from the parties’ BB&T IRA, and incurred a $5,727 tax penalty, which brings the total withdrawal to $22,907.99. Wife presented a full accounting of her use of the IRA funds. The evidence presented by wife, unrebutted by husband, shows that wife used the IRA funds after the separation to pay for attorney’s fees, the children’s college expenses, car repairs, household expenses and other expenses that wife was responsible for paying during the marriage. The court finds wife has established by a preponderance of the evidence that the IRA funds were used for a proper purpose, and her withdrawal of the funds does not constitute dissipation of a marital asset.

However, the court finds the $5,727 tax penalty constitutes dissipation of a marital asset. Wife made no effort to obtain funds from other available sources, which would have not resulted in a penalty. Equity requires that wife reimburse husband for one-half the value of the tax penalty. Husband is entitled to a credit of $2,863.50.
The evidence shows that during the time wife had exclusive use and possession of the marital home, several landscape lights located in the yard were intentionally broken. It cost husband $97.81 to replace the landscape lights. The court finds wife shall reimburse husband for the cost of the replacement lights. With regard to husband’s allegations of other damages to the marital home, the court finds the damages are speculative and that wife is not solely responsible and the court denies husband’s request for reimbursement for other damages.

Any payment the court would require husband to make to wife to equalize the value of the vehicles the parties are respectively retaining is offset by the $2,863.50 wife owes husband for one-half the IRA tax penalty and the $97.81 wife owes husband for the landscape lights. Wife is not required to make a payment to husband for one-half the IRA penalty and the landscape lights and husband is not required to make a payment to wife for purposes of equalizing the values of the parties’ vehicles.

The parties’ requests for attorney’s fees are denied.

Gardner v. Gardner (Harris) No. CL 10000007-00, Dec. 14, 2010; Hanover County Cir.Ct.; Craig Sampson, Janet E. Brown for the parties. VLW 011-8-045, 5 pp.