Pension Benefits and Divorce –

What is a pension?  How is it different from a 401K?

A pension is a type of defined benefit plan.  It is different from a 401K plan or profit sharing plan. Defined benefit plans “define” the benefit a person will receive at retirement. For example, a defined benefit plan may “define” the benefit as 66% of a person’s average salary for his or her last three years of employment. Defined contribution plans are often lump sum accounts that increase with employer and employee contributions.  Such plans increase or decrease based on the investment performance of the accounts.

Is my pension community property? 

*          Your right to a pension is community property –

Community property generally consists of assets that a couple acquires during marriage. You may think an “asset” is a thing you can see and touch like a car.  A community property asset can also be something you cannot see and feel in the usual sense. A benefit that will not be paid for years to come and that depends on age and years of service is this kind of “asset”.

At divorce, how do courts calculate a spouse’s share of a pension?

*          The longer your marriage, the greater the community’s interest –

If a man began earning service toward a pension on the day he married, and if he began receiving it on the day he filed for divorce, all of his years of service would also be years of marriage. In simple terms and subject to exceptions, his entire monthly benefit would be community property. His ex-spouse would be entitled to receive 50% of each monthly payment.

But, if only half of his years of service were also years of marriage, the community’s interest would be (in simple terms and subject to exceptions) only 50% of his pension benefit. His ex-spouse would be entitled to receive 25% of each monthly payment.

Should I wait to divide my pension with my “ex”?

*          An ex-spouse’s right to a pension does not disappear with time –

A 40 year old employee with the right to a pension at age 65 may decide not to pay a lawyer and experts to help her divide that “asset” with her “ex”.  She may think her “ex” will forget about it.  She may believe that if enough time passes, her “ex”’s right to the benefit disappears. This is not correct. Although the right to sue for a car accident may disappear with time, the right to share in a pension does not.  The 40 year old employee may receive an unpleasant birthday surprise at age 65 if her “ex” reappears and demands a share of her monthly benefit.

*          The best time to divide a pension is during your divorce proceedings –

During the initial divorce proceeding, there are often personal and financial incentives to wrap everything up at one time.    A husband might agree to give up his interest in his wife’s 401K if she gives up her interest in his retirement annuity. A wife might give up her interest in her husband’s pension if she can keep the family home. The cost to divide jointly owned property years later may be higher than the cost to divide it during the original case. In short, waiting too long to divide your community property may have unpleasant financial consequences.

Will I need experts to help me divide my pension?

*          If your community property includes a pension, you need expert help –

Most defined benefit plans require divorcing parties to submit a “qualified domestic relations order” (a QDRO) before they will honor the parties’ partition agreement. There is no universally acceptable QDRO. Each plan may have its own particular QDRO requirements. There are experts who specialize in the preparation of QDROs.   It may be a good idea in your case to use such an expert so there are no problems with the pension payments when you reach retirement age.

Valuing future retirement benefits is no easy matter. If you are thinking about buying your spouse out so he has no interest in your future benefits, you will need to consider many factors.  What will your final salary be?  What happens if you lose your job or resign and go to work somewhere else? How much should you pay her to buy her out?  If you hire experts  to calculate what your pension is worth, it is easier to “horse trade”.

The last word.

In conclusion, if your employer offers a pension among its other employee benefits, you should tell your divorce lawyer about it. Ask for a division of all your community assets in your initial divorce proceeding. Don’t be penny wise and pound foolish where expert advice is concerned. If you need to divide a pension, an ounce of prevention is worth a pound of cure.

Location Location Location: There’s No Place Like Home

Litigants in Louisiana courts may find complying with the special rules that are used to divide their marital property expensive, confusing, and time consuming. Necessary delays while those rules are being followed worsen the frustration of owning property with someone you no longer love – and may even despise. This is particularly so if an ex-spouse lives on the property and you do not. Although each district is different, family court case loads may be heavier than case loads in the district courts. In short, sometimes the grass on the district court side of the fence looks greener than the grass on the family court side. However, as the plaintiff learned in the following case, litigating in the right court – using the right law – is critical in marital property cases. In Tanana v. Tanana, 12-1013 (La. App. 1st Cir. 5/31/13), 140 So.3d 738, Mr. and Mrs. Tanana agreed as part of the partition of their marital property that they would put the former family home up for sale. Mrs. Tanana was allowed to live on the property pending sale. Unfortunately, the home did not sell even after five years. Although the home was clearly former community property, Mr.Tanana elected to attempt to partition the property in a district court proceeding using the law applicable to non-marital property. That law entitled him to have the property sold at a sheriff’s sale over Mrs. Tanana’s objection. At the sheriff’s sale, Mr. Tanana bought the home for a sum arguably less than what it would have brought at a private sale as they had originally agreed. Mrs. Tanana appealed arguing that Mr. Tanana should have proceeded in the family court using the special partition rules applicable to former community property. The Court of Appeal agreed with Mrs. Tanana. It reversed the trial judge’s decision, rescinded the sale to Mr. Tanana, and ordered the parties to litigate in the family court using the special partition rules applicable to marital assets. In community property cases, patience is not only a virtue, it is often a necessity. Consult with your lawyer about any delays in your community property proceeding and make sure you understand why it is taking so long.

Hope For The Best, Plan For The Worst – Separate Property in Louisiana

LOS ANGELES – JUL 19: Brad Pitt & Angelina Jolie arrive at the “Salt” Premiere at Grauman’s Chinese Theater on July19, 2010 in Los Angeles, CA

Brad Pitt and Angelina Jolie have married!

They have lived together, unmarried, for a number of years.  Both are undoubtedly very wealthy.  They have borne and adopted children.  What can their lives together to date and their change in legal status tell the rest of us?

In Louisiana, couples who live together without marrying are governed by different rules than those who marry. The unmarried are similar to roommates. Unless they enter into legal transactions with each other such as contracts or donations, they have no legal relationships that might complicate one person’s decision to move out. If one person decides to leave the other, he can take his wealth with him without adverse consequences.

Likewise, if two people decide to marry, the assets they have separately accumulated do not become jointly owned simply because a marriage has occurred.   Both before and after marriage, complications can arise if the couple does not keep what is mine mine and what is his his. Commingling separate property with property acquired after marriage can result in an accountant’s nightmare if the marriage later fails. If you or your spouse to be have significant separate property in Louisiana, you should consult with a Louisiana attorney concerning how best to plan your after-marriage estate.

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Recipe for Indigestion – Is Winning Chili Recipe Community Property?

Hot cilli con carne cooked in the pan

Three thousand people attended the 8th annual Louisiana Regional and State Chili Cook-Off at LSU in March 2014.  What if one of the lucky winners is asked to sell their secret recipe for a large chilipot of cash?

In Louisiana, this possibility gives rise to numerous legal questions.  Suppose that Mr. H. A. LaPeno obtained his winning recipe from his former wife, Cy Lantro.  Ms. Lantro might contend that the recipe was her separate property having obtained it from her grandmother on the latter’s death bed as a gift.

  • Would Mr. LaPeno’s use of the recipe constitute a conversion of Ms. Lantro’s asset and entitle her to sue her ex-husband?
  • Would it make a difference if Mr. LaPeno had enhanced the recipe with beans and extra chili powder?

In such circumstances, Ms. Lantro would need not only the advice of a lawyer specializing in the law of recipe copyrights and other types of “intellectual property” but also the advice of a lawyer with knowledge of Louisiana’s community property laws.  Ultimately, the value of the chili recipe will determine whether it is worth the financial investment that Ms. Lantro will be required to make in order to fight about it.  She may decide simply to eat and run.