What Happens In a Divorce If Someone Has a Pension?

Hi, I'm David Ward, and I help business owners who are facing divorce. One of the problem that comes up, particularly with folks that have been married for a long time, are issues with dividing pension plans. Pension plans have traditionally fallen into two different categories. One is called a defined benefit plan, which is what most people think of when they think of a pension. The other is something called a defined contribution plan, which is something more like a 401k. This video is about the former and not the latter.

Pension plans are essentially a fixed set of income that you can expect to receive over the course of retirement due to the number of years that you either worked at a company or for the federal government or something along those lines. There a couple of different ways that, that can be split.

One of the ways is to simply treat the income stream as the asset and divide the income stream itself. That's one of the ways that the courts can do it, and it's probably really sort of the easier way to do it.

The other way that a pension can be divided is you can higher or engage somebody like a certified divorce financial planner or a certified financial planner. What they can do is run a calculation to determine what the net present value of the income stream from the pension would be, and then simply divide that and you can use other assets that may be available in the marriage in order to make the parties whole, with one getting the pension, the other getting a payout in a lump sum that would be equal to some portion of the pension plan.

Those are two of the ways that we see things getting divided most commonly when we're dealing with defined benefit plans or pension plans. If you have any other questions or would like to contact us to speak about your case, please feel free to give us a call at the number on the screen.

Thanks, and I look forward to seeing you.

 

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