Divorce Attorneys! Avoid this common 'Marital Share' Trap in Retirement Settlements!

As we navigate the shift from traditional pensions to retirement savings plans (401Ks, IRAs, 403Bs, etc.), the landscape of divorce settlements has transformed. The critical task now involves detailed tracing to distinguish between marital and non-marital contributions—a task often missed by many divorce attorneys who stick to outdated pension strategies that lead them into the 'marital share' trap.

? The 'Marital Share' Trap Defined

The term "marital share" appears frequently in settlements, yet it's often left dangerously undefined. For instance, stating, "Wife shall receive 50% of the marital share from the Husband’s Fidelity 401K," implies existence of a non-marital share but fails to clarify, leaving room for confusion and dispute.

Why Does This Happen?

Many divorce attorneys still use pension-era methods, assuming that the retirement plan administrator will calculate the ‘marital share’. That is not the case. This leaves agreements open-ended, QDRO rejected, and clients frustrated that their non-marital property was not accurately identified.

? Dual Path Solution Effectively Replaces Vague Settlements

Path 1: Precision Before Agreement Determine the non-marital amount with an expert's assistance. This process involves explicitly defining shares to eliminate any ambiguity. By stating specific figures, we ensure clarity and prevent future misunderstandings.

For example, let's consider a scenario where the Husband's Fidelity 401K is has account balance at $500,000 as of the [specific Date of Cutoff]. Through expert tracing analysis, it's determined that $200,000 of this total is the Husband's non-marital ('separate') property. In such a case, the agreement should clearly state: “Wife shall receive $150,000 as of the [specific Date of Cutoff].” This amount represents her 50% share of the marital portion, calculated after excluding the Husband's separate $200,000.

Path 2: If the non-marital share can't be validated or determined, treat the entire account as marital. An agreement might read, "Wife receives 50% of the total account balance as of [specific Date of Cutoff] from the Husband’s Fidelity 401K," offering a straightforward division method.

Choosing the Right Expert

A Certified Financial Planner (CFP) is well-suited for potential court testimony, possessing expertise in retirement and investment planning. This is particularly valuable for making assumptions on investment returns in cases where statements are absent.

Experts: An Investment in Accuracy

Opting for expert guidance pays off, particularly when documentation is missing. The cost of expert involvement pales in comparison to the risks of inaccurate division or malpractice.

Need Expert Help with Retirement Division?

TOVA: One-Stop Retirement Division Ally for Divorce Attorneys

At TOVA, we specialize in simplifying the complicated. From verifying benefits and valuing / tracing retirement plans to providing FREE settlement language assistance and QDRO preparation. Additionally, I, Founder & CEO of TOVA - Denisa Tova-Liebman MBA, CFP, CDFA, CQS, have the court recognized credentials and experience for expert testimony if needed.

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For any inquiries, email Denisa at [email protected].

Disclaimer: TOVA QDRO & RETIREMENT VALUATORS ('TOVA'), led by CEO & Founder Denisa Tova-Liebman, specializes in expert retirement valuation and QDRO services. Please note that TOVA and its representatives are not legal practitioners. The insights shared in this article do not constitute legal, tax, or financial advice but are intended for informational purposes only.