Pensions… A Marital Asset

Pensions, 401ks, and other retirement funds are considered marital assets in equitable distribution states. This means that the portion earned during the marriage is part of the marital estate that is up for division at the time of divorce.

The pension is typically valued by a professional to determined the present value of the pension. The present value is not the current value on the past statement, but rather a calculated value of what it will be worth at the time of retirement.

The pension is often offset by another marital asset, such as a lump sum payment or equity in a home. This avoids future risk on the receiving party, because he or she would not get his or her share of the pension until the participant reaches the required age.

If there is not an asset to offset the pension’s value, a Qualified Domestic Relations Order is typically drafted to execute the action of paying out a portion of the pension to the receiving spouse at the time the participant reaches the required age. This document is very imporant and is typically drafted and submitted to the court after the divorce is final.

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