DIVIDING A PENSION IN DIVORCE

Couples going through a divorce or legal separation action in California will frequently have to deal with the issue of dividing the community property interest in one or both spouses work related pension plans. These plans are also often referred to as Defined Benefit Plans.

A pension plan is one where the employee will receive a set monthly payment after retirement for the rest of his or her life. The community will have an interest in the retirement benefits that were earned during the marriage.

An employee's benefit is based on several factors. These factors are usually, the age at retirement, the amount of years employed and the employee's last salary.

The important thing to keep in mind is the fact that these pension payments will be paid for the rest of the employee's life.

The Court must determine the value of the pension at the time of the divorce. This will usually require that the calculations performed by an expert know as a Forensic Actuary. The calculations will show what the present value of the pension is based on the length of the marriage, the current salary of the employee spouse and their remaining life expectancy.

When the parties know the value of the pension, they can agree to divide other assets so that all their marital property is equally divided.

The more common alternative, is for the Community Property pension to be equally divided. Each spouse will be entitled to receive one half of the community value in monthly payments upon the retirement of the employee spouse. This is usually done with a special document called a Qualified Domestic Relations Order (QDRO).

A QDRO simply orders the employee spouse's pension plan to split the value of the pension earned during the marriage and to create two plans. The first will be the plan for the employees spouse. The second benefit will be for the employee's former spouse.

It is very important that each spouse protects their pension rights by a property prepared QDRO. This document must be signed by the Court and provided to the Pension Plan.

Please make sure to consult with an experienced Family Law Attorney if you have any questions about dividing a pension in a divorce.

ASSET VALUATION

     A Family Law Court in California is required to equally divide the Assets and Debts of a couple going through a divorce. California Law requires that each person receive an equal share of the Assets and Debts that were acquired during the marriage.

     The most common problem that the parties will have to deal with is how should each of the assets be valued in order for a fair division to be completed for each person.

     Some assets are simple to divide. The value of a bank account or stock portfolio can easily be determined by looking at the most current account statement. There is usually no dispute as to the value of any cash assets.

     It is often necessary to have the family home appraised by a licensed real estate appraiser in order to determine the current market value of the house. The appraiser will inspect the home and compare the size and quality of the house with other recent comparable home sales in the neighborhood. Each person is entitled to have their own appraiser inspect the house if they don't agree with the value determined by the other person's appraiser.

     The Judge will often want to hear testimony from both appraisers at the Trial in order to decide what the value of the house is.

     One of the most difficult types of assets to value would be a business that the parties started while they were married. The Court will need to make sure that each of the Spouses receives an equal share of the value of the business.

     This will usually require the services of a Forensic Accountant. This is a Certified Public Accountant who specializes in inspecting and auditing business for legal matters. The Accountant will want to review the past few years of the Businesses' books and determine how profitable the business is. He will than issue a report as to what the current value of the business. Usually, one of the spouses will want to keep the business. This will require the spouse who keeps the business to pay the other spouse an amount of money equal to half of the business value.

     This can often be a complicated issue requiring a considerable amount of Accountant and Attorney Fees to prepare for Trial.