A Valuable Asset

The two most valuable assets a divorcing couple divides are the marital home and (often) the husband’s pension.

Divorcing couples often do not realize that the pension benefits of a couple ending a long marriage may be greater than the value of house they live it. A frugal couple who lived in one house for the duration of their marriage may have retirement benefits greater than the sale price of the marital home.

Very often these plans may be divided, so that the worker’s spouse, who very often is a stay-at-home mother without a pension of her own, acquires an interest in her husband’s plan via what is called a Qualified Domestic Relations Order (QDRO). Women need good legal advice about the distribution of a pension. Pension issues probably generate more appeals and reversals on appeal than any other issue in equitable distribution. Women very often are in a position to trade off their share of spousal retirements for other assets, but care should be taken in doing this. More than twice as many men as women have retirement benefits, and the benefits for men are generally much larger than those for women.

In general, pension plans may be what are termed qualified, which means they are regulated by ERISA and guarantied by PBGC, or nonqualified, which means they are not regulated by ERISA and not protected by PBGC. A plan may be defined benefit, where each employee is guaranteed a specific benefit, such as the old-fashioned “company pension” that the Depression-World War II generation expected after years of service to one company, or a defined contribution, where the employer’s contributions are specified, such as the popular 401(k).

Pensions plans can be very difficult for a layperson to understand. Calculating the value of a defined benefit plan for divorce purposes can be particularly challenging and require the services of actuaries.

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