Big Divorce Mistake #4: Not Valuing a Pension Interest

The Forensic Accounting Deskbook by Miles Mason, Sr. JD, CPA, published by the ABA Family Law Section

A spouse’s interest in a pension is often the most valuable asset of a marital estate, especially for long-term marriages. Valuing a pension interest may require the assistance (and report) from a forensic accountant. An example and sample report form may be found in The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, Second Edition, authored by Miles Mason, Sr. and published by the ABA Family Law Section.  This updated edition of one the ABA’s most popular resources explains the practice of forensic accounting and business valuation and how to apply it in family law cases. It provides a practice-focused introduction to the core financial concepts in divorce, such as asset identification, classification, and valuation, income determination, expenses, and more.

See Mason’s complete list of the 10 Big Divorce Financial Mistakes.

VIDEO TRANSCRIPT:

Tracy Coenen:             Can you tell us a little bit about why handling pensions in a divorce can be so problematic?

Miles Mason:              It’s kind of like, how do I love thee? Let me count the ways. There’s so many different ways pensions and retirement assets can be difficult, it’s hard to list. But the first one right off the bat, no question, can the asset even be divided? There are plenty of governmental pensions that cannot be divided, and if you can’t divide it, what are you going to do with offsetting or possibly some of the type of method? Later on, we’ll talk about that.

Once you determine it can be divided then you’ve got to determine how to divide it, which means you’ve got to learn about specific elections within that particular type of qualified plan, which is a mouthful, and we’ll talk about the documents you’re going to need to help you with that. And then if, regardless, you may need to value certain pension interests or retirement interests within the, considering the plan and the different elections in order to either divide the estate or to divide that asset.

Thank you to Tracy Coenen, CPA, CFF for inviting me to join her in this video series. Tracy is a nationally recognized forensic accountant practicing in Milwaukee and Chicago.