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Valuation of Pension in a Divorce

Valuation of all your retirement benefits, including pension funds, is a critical component of the divorce process. Pension funds in many marriages are the biggest marital assets, and it is important that you place an absolutely accurate value on the future benefits that are available to you from those retirement plans.

A pension plan is basically designed to provide an employee with a certain monthly payment when he gets retired in the future. Some retirement plans are easier to calculate than others. For instance, your 401(k) is easy to value, compared to defined benefit plans. Defined benefit plans are based on payout that is determined according to a plan formula and are not based on individual accounts. In contrast, it is much easier to calculate the value of a defined contribution plan, like the 401 (k), because the balance of the account is the value of the plan.

In comparison, determining the value of a defined benefit pension requires a complete appraisal that can determine the present value of the plan. That means that you need to accurately calculate the value of your defined benefit pension plans. The value of your plan can be determined by hiring an actuary who is especially experienced in making such calculations.

One way to divide the pension plan, is by paying your nonemployee spouse a lump-sum settlement at the time of the divorce settlement, while you continue to retain the pension. You can also use the deferred division plan in which each spouse is eligible for a share of the benefits when these are paid out. In the third method, the courts will retain the authority to distribute the pension funds in the future.

Any mistakes or inconsistencies in calculating the correct value of the pension funds, could be financially disastrous for you. Speak with a Colorado divorce lawyer before you get an evaluation of your pension fund done.