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Placing a value on pensions in a high asset divorce

Placing a value on marital property in a high asset divorce can be a difficult process, and property division negotiations may become particularly contentious in states like Texas that have community property laws. Experts are often called in to determine how much rare artwork is worth or what classic automobiles would sell for, but placing a current value on retirement accounts can be even more challenging. Pensions are paid for life, which means their value is dependent on how long the person receiving benefits will live and how much the benefits they receive years or decades from now would be worth today.

Placing a value on contribution plans is usually fairly straightforward. These pensions are linked to investments, and a current value can usually be obtained by calling or emailing the company that manages the plan. Figuring out what a defined benefit plan is worth involves math even though their benefits are fixed. Determining the value of a defined benefit pension involves estimating how long benefits will be paid for and how much money received in the future would be worth in today's dollars.

To estimate how long benefits will be paid for is usually done by taking life expectancy data from sources like the Centers for Disease Control and Prevention and then adjusting it based on factors such as the retiree's family history and known health issues. Once the total amount of benefits has been agreed on, a current value can be calculated using a discount rate.

Addressing these issues before couples marry could prevent bitter disputes should the marriage end in divorce. This is why family law attorneys with experience in high asset divorce cases may encourage high-net-worth individuals to consider a prenuptial agreement. These agreements could protect assets, avoid costly and public court battles and help a marriage to endure.

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