The Court of Appeals upheld a post-decree order letting a man transfer parts of an IRA and a 401(k) to satisfy a monetary award under Code § 20-107.3(D) in Johnson v. Johnson, 56 Va. App. 511, 694 S.E.2d 797 (2010). He had been ordered to pay $1.2 million in ten equal, annual installments, and said he had no other way to pay the $120,000 that had come due. Wife had a tax expert testify that if she cashed out the $120,000 in retirement funds after receiving them, she would only have $60,736 after taxes and early withdrawal penalties.
The trial court had the discretion to approve this particular property transfer, and to justify it by interpreting what it had intended in the original award, the Court said.
Neither the opinion, nor the trial judge's statements that it quotes, say why the difference between the pre-tax $120,000 value, and the post-tax, post-penalties $56,000, does not matter. The trial judge is quoted on that only as saying,
And when I ordered that in this case the award could be satisfied by the transfer of property, I think that intended to mean the value of the property. It was $120,000. What she decides to do with it is up to her. And I don't think the Court should take any consideration of the fact that she's going to say she wants to cash out.
Essentially, it seems that this is considered an exercise of the broad discretion that Code § 20-107.3(D) gave the trial judge. I think the trial judge and Court of Appeals understood very well the difference that it made, but the trial judge had the discretion to decide what was equitable in the circumstances. The trial judge may have been saying that at the time of the original award, he was basing the award on pre-tax assets and intended all along to divide that, not post-tax dollars. But not necessarily.