D-I-V-O-R-C-E Question
 

A good friend of mine is going through a bitter divorce in California. A settlement of all assets seems to have been agreed after much grief, but there is one sticking point. He has a "deferred compensation plan" at the company at which he works. This will theoretically be paid out in 10 annual installments after he retires.

She wants half - and he's prepared to give her half - but the company refuses to put the plan in both names as a matter of policy. It has to remain in his name.

He could pay her out in present value - but there's an even chance the company may go under - in which case the deferred compensation plan disappears.

She is unwilling to accept a simple promise on his part to pay.

They are trying to find some sensible way to split this plan up right now - or secure her half interest in it - but have been unable to come up with any formula that works for them both.

They have been massively raped and pillaged by lawyers already - and are reluctant to go back to them again with this last detail.

Does anyone have any experience with this kind of thing? Any meaningful input will be appreciated.

My solemn advice after going through that would be to stop being petty--no matter how much you have on the line--and come to an agreement, together. It'll be the last thing they ever agree upon. It ain't worth it. All they're doing is feeding their lawyers. They need to be civil this one last time...next Christmas will be better for them both hopefully!
Christian.

A buddy just went through the same thing. He and his ex agreed on a deal where he cashed out with her at a lower value. Like your friend's situation there was some question as to how much, if any money would be available at retirement. They are both pretty sensible people, however, and managed to get through the whole divorce with one attorney and very low fees. It sounds like your friend's wife may not be willing to deal.

He could always cash it out and pay out 50/50. Not ideal, but if it gets rid of her once and for all, it might be worth the tax hit.

If it is truly a deferred comp plan registered with the State and SEC, the money he has put away is his and should be safe from a company collapse, unless it is all in the company's stock(bad). Can he lessen the risk by moving the $ into other shares or money market funds? He cannot collect or get a payout until a certain age is normally past(59 1/2 )(or whatever the plan says), or he will pay a huge penalty(bad). So if he takes $ out(again, if the plan allows it), they both lose. tough spot to be in.

Cash her out, get it done, move on, don't look back. There is no other sane way.

Is she hot? Just kidding...my daughter got divorced in California...community property & all that. She ended up paying his debts, and paying him alimony for a couple of years. No kids...go figure.

Is she looking to remarry :)?

She's wearing out hubby number two...He too needed a sugar momma..

Dang...struck out at the family gathering, and now this :(

Eeeew...

I kid, I kid :) Haven't you read the other thread...

Well, you could have going after your brother's wives...you never know...

No brothers for me...it's even worse than you were thinking :)

http://forums.pelicanparts.com/off-topic-discussions/383856-who-did-you-marry.html

Not that there's anything wrong with that...

A true "Deferred Comp" can be withdrawn for emergencies. Withdraw her 1/2, she pays the tax on it. His stays where it it.....In most states, 1/2 of the money is her's if they have been married since contributions started....

I think the sticking point is the company, not the two exes. I don't do family law but it seems to me this sort of thing is done all the time. I think all they have to do is go back to court and get an order directing the company to put a portion of the defered comp into her name. I think it is not that the company can't do it, it's more that they won't. With a court order they don't have a choice.

Thanks. This sounds like a plan. My understanding was the company categorically refused to put a portion of the deferred comp. into the wife's name on the basis that she is not an employee jada jada. So a court order directing the company sounds like the right approach.

Many thanks for all the replies.

And the say that OJ was a bad guy. Go figure.

Not sure if this helps, but in the Navy after a certain period of marriage, your spouse is legally entitled to a percentage of you retirement...the amount is negotiable.

The Navy will not assign or name your spouse on the retirement account, but, once the payments begin, the spouse simply calls and the government and payments are assigned based on the divorce settlement.

The reason this is done is to protect the service member should the spouse pass away prior/after the service member retires: the relatives of the spouse have no claim on the service members retirement account. Once the spouse has passed, the payments revert back to the service member. If the spouse was named on the account that would not be the case.

I suspect that company in question has the same concern.

Since there is no absolute expectation of payment how can there be division of payment? Seems like the company is right and this should be outside the settlement. She should have no claim on future income that is not expected unless she maintaining custody of children. If a person makes a given amount of money in period one (present) and ten times that in period ten (future) she should have to take him to court to pursue a higher settlement. If she is being this petty, this man, no matter how sad, needs to be defensive of his assets as she is going to get a lot of them anyway just as a function of it being a 50/50 state.

James:

She is only claiming a half interest in the deferred comp. that has accrued at the time of the settlement.

The reason there is no absolute expectation of payment is, as I understand it, a very real risk that the company will tank - and the deferred compensation is not entirely secure in such situation - although I note what gmeteer has said about this upthread.

It seems to me that part of the marital estate is the inchoate right to receive defered compensation from the husband's employer. Both parties agree that any future payments should be split equally; the only question is the correct vehicle to ensure the payments are made correctly, if they are received at all.

I don't know what the correct vehicle would be, probably as suggested above some sort of assignment of benefit or payment, but it should be a simple matter of getting the right form, going back to court long enough to get a judge to order the assignment or whatever, and then serving it on the company. It will probably require some more lawyer time, but I would think that if your friend limits the scope of representation to this one issue, they exes have an agreement on paper for the lawyerto review, it would be relatively inexpensive to have the lawyer do the right paperwork.

Yup, agree wholeheartedly.

I went through this about 7-8 years ago. I work for a large public agency so there was no issue of it "going out of business" but some of the best advice I got was come to a resolution NOW. DO NOT sign any agreement to give her X number of dolars later.

I ended up transferring a lot of money from an IRA I had to one she set up for herself with the same family of mutual funds. I don't know about elsewhere but in California we were a "marriage of long duration" - over ten years so I had to not only give her a lot of this deferred comp but also take on a ton of debt she had incurred during the separate/reconcile/serparate ordeal of 2-1/3 years. Of course she had not serviced that debt adequately and when it was transferred to me?.............EEK........it was at 23.9%. I about "shat" as the expression goes. It hurt and it hurt worse because I was stupid. I waited to transfer the funds as long as possible out of regret, bitterness, whatever and because the value of the market was dropping I ended up paying her with a greater number of shares than it would have taken if I'd just acted quicker.

When the market rebounded she got more than she otherwise would have because she had a greater number of shares of mine. BUT...I am financially free and because of her earnings and the age of our children i didn't have to pay spousal nor child support. Almost 8 years later and i have recovered but I will never have the financial position I once had.:rolleyes: