Dissolve the marriage with a substantial payout: Trudy anticipated sharing her spouse's £1m pension - only to encounter an unpleasant surprise
Divorce and Pensions: Uncovering the Divide
Frequently, as a divorce lawyer, one of the questions I get is, 'what's my optimal time to file for divorce to secure the highest settlement, especially regarding my partner's pension?' While every case differs, the length of the marriage plays a significant role in determining the amount of pension assets divided.
Take Trudy, who was married to Eric, a wealthy property developer, for five years. The real prize was Eric's pension, worth over £1 million. However, when Trudy tried to claim a fair share, she was left disappointed. Eric successfully ring-fenced the pension he had built prior to the marriage, leaving Trudy with only a small portion that had accrued during their short relationship.
The length of a marriage significantly impacts a divorce settlement, as witnessed by the contrasting experiences of Trudy and Gloria. Gloria, married to Frank for over three decades, was granted half of his pension due to the court's equal division policy. Frank couldn't shield any of his pension savings from Gloria's claim.
Now, what happens in marriages that are slightly longer than average (12 years for instance, but not over 15)? In such cases, the court often equalizes the pension capital, providing neither spouse has amassed wealth before or after separation. It's always advisable to consult a pensions expert to ensure an accurate calculation.
Gemma, with a 16-year marriage to City broker Paul, made a common mistake. Instead of claiming a share of his substantial pension, she opted for the security of the marital home through a 'set-off.' While this might seem appealing, consulting an actuary before making such decisions is essential, as wives often receive a lower settlement in such cases.
Another frequent query I get is whether mediators will consider all assets to maximize the settlement. Mediators will indeed help the couple and employ actuaries to determine pension divisions, regardless of the marriage's duration. In most situations, courts encourage parties to explore alternatives like arbitration instead of litigation.
Clear expectations are crucial when navigating divorce proceedings, especially when it comes to pensions. Conduct or behavior will typically not impact the settlement unless it can be demonstrated that it had a financial impact.
Take the case of Henry, who thought he could undermine his wife's claim by transferring his shares, cashing his pension, and giving it away. After litigation, the court added back the pension's value, the cost of his Lamborghini, and the shares to his side, then divided everything equally. His efforts to reduce his assets backfired.
Lastly, keep in mind that while the length of the marriage matters, there's no fixed formula. Courts consider various circumstances to ensure a fair division. In all cases, play fair and honestly to achieve the best possible outcome. Divorce doesn't have to be a minefield if both parties work together rationally.
*All names have been changed to protect client identity.
Did You Know?
- Different states apply equitable distribution or "just and right" approaches when dividing pension assets, not a simple formula based on marriage duration. Each state has unique laws regarding property division [1][3][5].
- A Qualified Domestic Relations Order (QDRO) is usually needed to split pensions without incurring tax penalties [1][4][5].
In the realm of personal-finance and wealth-management, it's essential to understand that the length of a marriage plays a significant role in the division of pension assets during a divorce. For instance, as observed in the case of Gloria, who was married for over three decades, the court applied the equal division policy, granting her half of her spouse's pension.
On the other hand, in marriages where one spouse has built up a considerable pension prior to the marriage, such as in Trudy's case, ring-fencing these pre-marital savings may be possible, leaving less for the other spouse.
Considering the complexities surrounding pension division, it is always advisable to seek advice from a pensions expert, actuary, or legal professional specializing in personal-finance and wealth-management. This can help in making informed decisions to secure the most favorable division of savings, pensions, and assets during a divorce.
