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LawTalk
LawTalk, Attorney and Counselor at Law
Category: Family Law
Satisfied Customers: 27889
Experience:  30 years legal experience. I remain current in Family Law through regular continuing education.
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CAN THE COVERTURE FRACTION BE USED TO DIVIDE UP 401K in a

Resolved Question:

CAN THE COVERTURE FRACTION BE USED TO DIVIDE UP 401K in a divorce?
Submitted: 2 years ago.
Category: Family Law
Expert:  LawTalk replied 2 years ago.
Good morning,

I'm sorry to hear of your confusion.

While a coverture fraction is useful in the division of some forms of retirement plan---such as military pensions, it is often quite inappropriate to use it in the division of a 401 K where there are regular payments made to the plan.

With a 401K division, the preferred method of determining the amount to be divided is to determine the value of the plan at time of marriage and add to that the increase in value of the plan over the years directly attributable to the pre-marriage assets in the plan. Then subtract that number from the total value of the plan at the endpoint date when the division will be determined. This leaves just the value of the plan which is due to the input of funds during the marriage and any increases based on those payments. It is that amount which will generally be divided between the divorcing parties.

It is occasionally necessary to have a forensic accountant review the specific 401K in order to determine the figures and make an accurate calculation.

I wish you the best in 2012.

Because I help people here, like you, for a living---this is not a hobby for me, and I sincerely XXXXX XXXXX abiding by the honor system as regards XXXXX XXXXX I wish you and your family the best in your respective futures.

Would you be so kind as to Accept my Answer so that I may be compensated for assisting you? Bonuses for greatly informative and helpful answers are very much appreciated. Thanks Again,

Doug
Customer: replied 2 years ago.

Just to clarify

 

Value of 401K at date of marriage is $1000. This increased to $1500 at the end of marriage.

Contributions during marriage $500. This increased to $750 at the end of marriage.

 

In your explanation, do I owe $750 or $1250 to my X?

 

Expert:  LawTalk replied 2 years ago.
Good morning,

The coverture fraction would work in the simple example you cite---BECAUSE the 401K does not generate any interest income. (if 401K worth 1000 at marriage, and 500 added and worth only 1500 at end of marriage---there is no gain or loss based on market forces) In real life this is not often the case. Over time 401K's either make gains based on the market, or they lose money based on the market.

I'm afraid that the rest of the numbers don't make sense to me.

You said both that "this increased $750 and $1,500 at the end of marriage. It can't do both. Can you explain what you mean?
Customer: replied 2 years ago.

Example

Date of marriage is 01/01/2000

Date of divorce is 01/01/2010


PART A (PRE MARRIAGE 401k CONTRIBUTIONS)

Value of my 401K at time of mariage is $1000

This $1000 is pre marriage contributions to my 401K

A time of divorce, this amount increased to $1500

 

PART B(MARRIAGE CONTRIBUTIONS TO 401k)

Contributions made during marriage: $500

These contributions increase to $750 DURING MARIAGE

 

I assume my X would get 1/2 of the $750 from part B

Does my X get anything from PART A?

If the above answer is NO, will all counrts in MI accept this as an equitable division. If my X wants half of the increase in PART A, can I fight it?

Expert:  LawTalk replied 2 years ago.
Thank you. XXXXX understand.

The reason that the two numbers are broken out---Part A and Part B, is because your husband ONLY gets a share of Part B. Part A is all yours to keep as its value was not increased by efforts of either of you during the marriage---but solely by outside market forces.

Yes, your soon to be ex will get, at most, 50% of the $750 in Part B. This is the equitable division of the 401K.

You may absolutely fight his attempt to grab any part of Part A.

I wish you the best in 2012.

Please, remember that I only receive credit for helping you when you Accept my answer. Until then your payment is simply held by JustAnswer.com and not shared with me. So, please click the ACCEPT icon if my Answer has been informative, and helpful to your understanding of the law. Thanks again.

Doug
LawTalk, Attorney and Counselor at Law
Category: Family Law
Satisfied Customers: 27889
Experience: 30 years legal experience. I remain current in Family Law through regular continuing education.
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