If you intend to file for divorce in the near future, figuring out the financial split can be one of the biggest logistical challenges. This is particularly true for couples who have been together during the bulk of their peak income-earning years.
Here's a quick guide to help you figure out pensions, annuities, and inheritances.
Pensions
The retirement benefits accrued during a marriage are generally considered the joint property. However, there are nuances of retirement benefits that can be tricky to split equitably.
Private Plans: because private retirement plans are often managed more loosely than state or federal plans, a divorce lawyer will need to file a domestic relations order (DRO) at the time of the divorce. A DRO will assess the current value of the retirement plan and equally divide the total of the investment. Once the DRO is signed, the retirement benefits will be regularly dispersed in perpetuity. However, it's important to remember that the value of the retirement plan may change due to factors in the financial markets.
Buy-Outs: some retirement plans will not divide retirement benefits. In these cases, a lump sum can be paid by one party to the other or the value of other assets may be leveraged against the total value of the retirement plan. For instance, if the assessed value of your home is relatively equal to that of your retirement plan, you might be able to swap assets. It's critical to have your attorney carefully review your options before you make a final decision. In many cases, you should prepare to negotiate the terms of your buy-out for an extended period.
Health Care: one of the perks of many retirement plans includes health care. Because premiums and deductibles can become confusing when the policy becomes split, your divorce attorney can help you negotiate terms that make sure that you receive the benefits you're entitled to.
Annuities
If you and your ex-spouse paid premiums on an annuity during the course of your marriage, the annuity will likely be considered joint property. However, annuity benefits can be difficult to split evenly. Because annuities are complex financial instruments, the best option is almost always negotiating to have the annuity bought out entirely by one party. This maneuver can help you and your ex-spouse protect the total value of the annuity and avoid the tax burdens that can come from dissolving the annuity prematurely.
Reach out to a divorce lawyer to learn more.
Share15 June 2020
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