For divorcing spouses, dividing pensions and retirement benefits, such as IRAs and 401(k)s, becomes more important the longer couples are together because they grow in value. Dividing them fairly does not always mean equally, since Maryland is an equitable distribution state, which means the Court will take several factors into account to rule for a fair division of marital assets and debts.
If you face dividing pension and retirement benefits in a Frederick divorce, you know these assets are meant to provide a comfortable retirement. You can learn how this process will affect your future by consulting our experienced and compassionate divorce attorneys now.
To equitably distribute assets, the Court will consider how long the couple has been married, the age, health, and education of the spouses, and earning potential, including whether one spouse built a wage-paying career and the other managed the home and raised children. If one spouse earned a pension or contributed to retirement benefits during the marriage, the Court will act fairly to ensure both parties share the retirement income.
Military pensions are divided according to the 1982 Uniformed Services Former Spouse Protection Act.
The Court uses two methods to value pensions: the Present Cash Value Method or the Deferred Distribution Method.
The Court generally relies on the Present Cash Value Method when the spouse who earned the pension is near retirement, and benefits can be accurately calculated using actuary tables to determine the gross benefit figure, discounted for taxes and inflation. The result is the amount the Court divides equitably, either by requiring one spouse to pay the other on a schedule or awarding another asset of like value.
For the Deferred Distribution Method, the Court calculates how many months the pension accrued while the couple was married by the number of months it accrues before it is payable. Generally, the non-employee spouse must wait until the pension is paid to the employee before collecting. Dividing a pension in a Frederick divorce has a crucial role in both spouses’ future and should be handled by our experienced attorneys.
When the value of pension or other retirement benefits is disputed, a forensic accountant can become involved to determine how dividing the asset will serve both parties in Frederick fairly.
The expert initially opines whether a pension can be divided, which most are. A value is determined early in the divorce proceedings to assist the attorney representing the non-employee to evaluate the value of all the marital assets. The accountant can be called as an expert witness if a trial ensues.
To be considered marital property, the retirement account contributions to IRAs or 401(k)s must be made during the marriage. For instance, if one spouse sets up an IRA before the marriage and never adds additional funds to it during the marriage, the IRA will remain separate property. If the spouse adds money during the marriage, the amount added would be earmarked as marital property. If both spouses open IRAs of equal value during the marriage, the Court will likely award each spouse’s IRA to them separately, even though it is marital property. Dividing IRAs or 401(k)s in a Frederick divorce can be complex, and you should consult our attorneys for skillful guidance in your situation.
In many cases, retirement assets are significant if they are amassed during a long marriage, and if a divorce is inevitable, dividing them is crucial to both spouses, even if only one spouse earned them. After all, they were meant to sustain you both during your golden years, which they will still do, although they will not be spent together. Our attorneys are available to help you identify and value marital assets and guide you in dividing pension and retirement benefits in a Frederick divorce. Call now to schedule a confidential assessment of your case.
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