Case Consultation
(423) 888-3030
Dividing pensions and retirement benefits in a Chattanooga divorce is especially crucial after a long marriage, as the assets gain value over time. Therefore, these assets must be appropriately valued to safeguard your financial future and lifestyle.
If you or your spouse has accumulated pension and retirement benefits during the marriage and you face dividing them in an upcoming divorce, talk to a dedicated property division attorney who can explain the importance of categorizing and valuing these marital assets.
Tennessee is an equitable distribution state, which means a judge can allocate marital assets to verify both spouses are treated fairly. For example, if one spouse is a wage earner and the other stays home caring for children, the wage earner’s pension will most likely be divided so both spouses have retirement income.
According to the Tennessee Code Annotated Section 36-4-121(a)(1), all assets accrued during the marriage are to be divided fairly. This generally includes vested and unvested retirement accounts and pensions, even if only one spouse contributed to the value.
Each party’s legal team must draft a Qualified Domestic Relation Order (QDRO), explaining the pension division, which is usually entered as a court order within 60 days after the judge enters the final divorce decree.
The court values a pension by the Present Cash Value Method or the Deferred Distribution Method.
If the spouse who accrued the pension is close to retirement and pension benefits can be accurately calculated, the court may prefer the Present Cash Value Method when dividing the asset. Using actuary tables for life expectancy, the court predicts how many months the employee will collect benefits and multiplies that number by the current payable benefit, which is the gross benefit figure.
This present cash value is then divided fairly. The court can require the employee spouse to pay on a schedule or instead award the non-employee spouse another marital asset of equal value.
In the Deferred Distribution Method, the courts divide the number of months the pension accrued during the marriage by the number of months the pension accrues before it is paid to the employee. In these cases, the court typically rules that the payment to the non-employee spouse is deferred until the pension is payable to the employee.
Valuing retirement assets can be highly complicated. To assist an individual, an experienced attorney in the area could call a forensic accountant as an expert witness if pension valuation is disputed to help ensure each party receives a fair portion under state law.
The expert can determine if a pension is dividable. If it is, the expert provides a value estimate to the individual and their legal counsel. The expert can also testify at trial if deemed necessary.
Under state law, any contributions to retirement accounts register as marital property if they occurred during the marriage.
For example, if one spouse opens an IRA with $10,000 before the marriage but does not add additional funds during the marriage, the IRA will be considered that spouse’s separate property. However, if the spouse adds money to it during the marriage, the added amount would be considered marital property.
Pensions and retirement accounts can turn out to be the most significant marital assets a couple amasses during a marriage, and they must be divided fairly, even if only one spouse contributed to them.
Our experienced attorneys are here to help you identify and value marital assets, including those tucked away for retirement. Call today for your private consultation.