Dividing Pensions in Divorce.
When couples divorce, it is common for the court to divide marital assets in a relatively equal fashion. The court may consider such things as current income, potential future earnings, individual assets, combined assets, and support for children. Often, the largest asset between a couple is their home, and potential earnings may depend on what kind of occupation or education each spouse has. The court considers all of these aspects and determines a final number. Although this number should be equitable, it is not required to be exactly equal.
For example, when the court divides pension assets, the court will not just split the pension in half, but will instead determine what portion of the pension was earned over the course of the marriage. That is, any portion of the pension that is earned before or after the marriage is not considered in the division of assets.
A recent Iowa case regarding this division of pension assets provides an excellent explanation of this process. In that case, the wife received total assets of $196,187 while the husband received $37,707 in the original divorce proceeding. In addition, the district court awarded the husband the entirety of his pension because of the huge difference in the division of the assets. However, the Court of Appeals reversed because the pension should have been divided between the couple only after considering the amount of pension that the husband earned outside of the marriage. But, the Court of Appeals did not consider the awards already in place to determine the final award. Finally, the Iowa Supreme Court decided the case in a per curiam opinion.
The Court stated that although the amounts awarded should be equitable, they are not required to be equal. In this case, however, the amounts ended up being very close to equal. The equation that the Court used is known as the Benson formula. It takes the pension earned due to hours worked outside the marriage and awards that amount to the individual who earned them. Only then does the court consider the division of the rest of the pension. Once that amount is removed, the court simply divides the total in half and awards half to each side. The Court of Appeals applied this same method.
Accordingly, the Iowa Supreme Court stated that the pension should be divided, but only the portion that was earned during the course of the marriage. The husband, who is now retired, worked a total of 450 months, and 376 months were during the course of the marriage. Therefore, the Court stated that the remaining 74 months would not be subject to division. Then, unlike the Court of Appeals, the Iowa Supreme Court also considered that the wife received substantially more assets than the husband did before the pension split. Since the wife received $158,480 more than the husband did originally, the Court split the pension so that the difference between the pension awards was also $158,480. That is, the pension was worth $385,088 after removing the earnings awarded from outside the marriage, so the wife received $103,304 and the husband received $261,784—a $158,480 difference.
The Court noted that although a half and half division is normally appropriate, the deciding court should also consider any additional disparity between the other divided assets. In that case, the reason that the difference was so large is likely because the wife was awarded the house. The court was possibly awarded her the house because their minor child planned on living with her. The husband was also ordered to pay $150 per month in spousal support until the minor child graduated from high school.
Dividing assets in a divorce can be a trying process, especially because the court has complicated rules in addition to the demands of each side of the divorce proceedings. McCarthy, Callas, and Feeney, P.C., has experienced attorneys who can help you deal with property issues, support, child custody, and any other issues that may arise in a divorce or dissolution of marriage proceeding. Call 1-309-788-2800 today and we would be happy to discuss any legal questions you may have.