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Calculating the Division of Retirement Benefits in Divorce

Retirement benefits are a source of financial security that are highly valued and take years of work and fiscal sacrifice to accumulate. However, just like other assets owned by a married couple, these accounts are subject to division in the event of divorce. This reality is often a hard blow to the spouse who amassed the retirement account, and he/she is understandably concerned with finding out how much of this money will be given to the other spouse. Furthermore, a spouse seeking a share of the other spouse’s retirement benefits may rely on this property award to bridge the gap between divorce and becoming single, so both spouses have something significant to lose and gain in the divorce process.

Understanding Indiana’s view of marital property and its division in divorce is a key component to answering the question of how to divide retirement accounts, but a recent decision by an Indiana court of appeals provides some illustration of this issue. The court was asked to assess the fairness of the lower court’s division of the husband’s pension, and found that the cut-off date chosen by the trial court (the date the divorce was granted) was too long, and instead should have been the date the pension was valued, taking 10 months of appreciation from the wife’s share. Given the high value these accounts have, their treatment in divorce is extremely important for both parties, and a discussion of rules concerning its division in divorce will follow below.

Property Division in General

Indiana law assumes that all property owned by either spouse, even if some was acquired before marriage, is part of the marital estate, and subject to division in divorce. In addition, there is a presumption that marital property will be divided equally, which means that while the division of each asset may differ, the overarching amount each spouse can expect to receive is between 40 and 60%. Thus, a substantial portion of any retirement account will go to the other spouse. It is possible to rebut the presumption of property as marital and an equal division, meaning it may be possible to exclude some retirement funds, particularly if an account was opened and primarily contributed to before the marriage. However, to do so requires presenting specific evidence, and the outcome is rarely predictable. An experienced divorce attorney should be consulted about the most effective way to make this claim.

Valuation and Division of Retirement Accounts

Turning specifically to retirement assets, outside of establishing whether some of the funds should be excluded as separate property, the other key piece is assessing the value of the accounts. At the time of the divorce, the account may not be vested, an event that may be years in the future. Consequently, it would be hard to predict the real value since the money will not be available for distribution for some time. Further, retirement account values are routinely tied to the interest in which they are invested, meaning it fluctuates all the time. Valuation experts are usually brought in to assign a value to these assets, which can lead to conflict if the method used is not accepted by both spouses. Trying to agree on the expert in advance will reduce this likelihood, and make the resolution of this issue less complicated.

The second key piece is when the other spouse loses rights to additional increases in value once the divorce is filed. As noted above, an appeals court decided the valuation date was the cut-off in the case mentioned above. Thus, the earlier the valuation is completed and filed, the sooner the other spouse will be blocked from sharing in increases in the account.

Contact an Indiana Divorce Attorney

Both spouses have a significant interest in retirement benefits, and this issue can quickly become complicated and contentious. Christopher L. Arrington, P.C. will use years of  knowledge about divorce law to help you receive the best possible outcome with the least amount of protracted litigation. Contact the Danville law firm today to learn how your divorce may be benefited.

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