division of assets

[Gary]

Say an individual gets married at age 30 and gets divorced at age 40.

He terminates from a company just prior to marriage.

He leaves that company with:

a defined benefit pension of $500 per month payable at age 62.

Since this entire benefit was accrued prior to marriage it would seem that it would not be part of marital property.

At age 30 (marriage) the the pvab was say 10,000.

And at age 40 (divorce) the pvab is say 20,000.

So, in essence he earned 10k on his pension while married but it is not marital property.

Now, turning to his account balance.

He leaves the same company with a 401k account of 20k at time of marriage, which he rolled into an IRA account.

At time of divorce the account is worth 40k. No contributions were added to the account as it is all investment income.

Should the 20k of investment income (though based on the basis that was all pre marriage) be considered marital property?

And say now, a couple of years after divorce (but prior to any division of assets) the account is worth 30k. Should the loss of 10k be marital property?

In conclusion, is the analysis of the determination of marital property related to the account balance a subjective analysis or is there precise law on the account balance portion that is marital property?

thanks

[Guest cbclark]

Marital property is determined under the applicable state law. Even non-marital property can be subject to horse trading in a divorce, and if the parties agree to split something that is "technically" not marital property, that is their call. In a highly contested divorce the judge may decide unilaterally what will be subject to division. If a decision is rendered that affects retirement plan assets, the plan administrator does not quibble with whether the assets were marital property or not; the plan administrator determines whether or not the relevant domestic relations order is qualified to then divide the assets in accordance with the order. So the long answer is that the determination of the status of the account as marital or not will be made under your state laws.

[mbozek]

Marital assets subect to divison in divorce exclude property acquired before the marriage and by gift or inheritance during the marriage. If the DB benefit was accrued before the marriage its not a marital asset. As for the inclusion of increase in value of DC benefits and IRA after date of marriage in marital estate you need to check state law to see whether earnings on assets acquired before the marriage are excluded from property subject to division in divorce. Parties can always agree to transfer assets that are not included in marital estate in property settlement.

[Gary]

the retirement assets pertain to a private 401k plan and then a personal IRA account after rollover.

In reviewing cal law I only locate statute in connection with public employee plans.

so what i probably need is cal case law dividing private retirement plan assets.

anyone know of any case law on the subject? thanks

gary

[david rigby]

Don't overthink it. See comment above about "horse trading".

[K2retire]

California often looks at everything as community property without regard to when it was acquired.

[mbozek]

California often looks at everything as community property without regard to when it was acquired.

CA community property excludes property acquired before the marriage or after separation and property acquired by gift, devise or inheritance.

[masteff]

And say now, a couple of years after divorce (but prior to any division of assets) the account is worth 30k. Should the loss of 10k be marital property?

If the divorce is being fough tooth and nail, then you'd insist that whatever ratio of the account is deemed marital property would be applied to the loss as of the date of division. So the spouse might be awarded 1/2 of the gain as of the date of divorce plus subsequent gains and losses, meaning the spouse would only get $7,500 {(20K * 1/2) - (10K * 1/2 * 1/2)}. Using date of divorce plus earnings/losses is important in accounts with subsequent contributions and withdrawals.

Edited for bad math

Unless you're horse trading as suggested above... in which case the spouse might get $X as of the date of the property settlement plus earnings and losses. Some QDROs even make it easier and just say $X as of date of division of the account.

[mbozek]

This discussion of how retirement benefits are divided ignores the important question of what the divorce decree/property settlement provides as the formula for dividing up the retrement benefits. The divorce decree should provide a specific formula of what the rights of the AP are to benefits e.g., 50% of the accrued DB benefit as of a certain date and what % of the DC accounts will be given to the spouse. The divorce decree will state whether a pension benefit is excluded from the property settlement. The parties then negotiate the terms of the QDRO based upon the specific terms of the division of property approved by the court and the conditions set by the plan administrator. For example, some plans will not go back more than 12 months to determine the values of DC account balances included in the martial property. Other plans will charge a fee to research the values.

If the parties were granted a divorce without a court approved property settlement setting the formula for dividing up the retirement benefits then they deserve the chaos that they have created b/c now they have to negotiate the division of property acquired during the marriage.

There is plenty of information available if you google California community property law/retirement benefits.