Can you buy out your spouse’s interest in a pension plan? If either spouse acquired some or all of a pension during a marriage, then it is an asset to be considered in the equitable distribution of marital property. One option is to divide the marital portion of the pension via a Qualified Domestic Relations Order (QDRO). This order allows a pension administrator to segregate a portion of the pension for the non-participating spouse, and it can be paid out pursuant to the terms of the pension plan.
Another option, if the participating spouse wants to keep the pension from being divided, is to buy out the non-participating spouse. In order to propose a buyout, the pension is valued based on the future stream of income and a present value is determined. For instance, if the pension would pay $1,000 per month for the lifetime of the participating spouse after age 65, then life expectancy tables are employed to determine the anticipated life span, and a value is determined. Next, a present-day calculation can be determined by applying a reasonable interest rate and determining what would have to be paid today to be equivalent to one-half of the future value. Thus, a present-day value offer can be made to the non-participating spouse to waive the interest in the pension plan.
Other considerations are additional assets in the marriage that can be used to set off the present-day value of the pension. If the marriage is a long-term marriage, then both parties may be counting on the pension income to fund retirement, and the non-participating spouse may be unwilling to consider losing that retirement income. However, if a value can be determined and agreed upon, then it is possible to buy out a spouse’s interest in a pension.
If you would like to schedule a case assessment with attorney Melanie Hogg (or another Held Law Firm attorney) to discuss your divorce or estate planning, please call 865-685-4780.