The Spoils of Marriage: Divorce Is as Miserable as Ever, but More Complicated. Warring Couples Put Stock Options, Pensions and Even Frequent-Flier Miles on the Table
Stern, Linda, Newsweek
Marriage is about love; divorce is about money. And these days it's about a lot of money. Couples that in other eras might have fought about the house and the china now have stock options, retirement plans, time shares and even frequent-flier miles to split up.
That's spawned a new profession, as the money crowd moves in to advise severing couples about the financial implications. Debra Neiman, a Wakefield, Mass., financial planner, tells clients to take steps as soon as they see the writing on the wall. Get separate checking accounts and credit cards, she says. Make sure you both maintain health, life and property insurance during the separation period. Then find a qualified therapist to take over anger management so Neiman can focus on the finances. Couples who put emotions in control will pay a price; average legal fees top $20,000 and move quickly into the $50,000-and-above range when disputes heat up.
Pension parity: Divorces have come a long way since 1997, when Lorna Wendt became the patron saint of divorcing women everywhere by trying to get half of her executive husband Gary's General Electric Co. pensions, deferred compensation and stock options. (She's still trying; the case is on appeal in Connecticut.) Now many spouses know they're entitled to a piece of their partner's retirement plan, but they may not know how to get it.
How, for example, do you evaluate a pension for divorce purposes, asks Tim Voit, whose Milwaukee firm Voit Econometrics Group focuses exclusively on this problem. "It's the largest marital asset, the one that is often misinterpreted or overlooked, and any slight variation in the assumptions used can result in an understatement or overstatement of thousands or tens of thousands of dollars," he says. The 401(k) plans are easiest to split: two working partners can decide they will each keep their own plans. When only one has an account, they can transfer half from the account holder (usually him) to a rollover account for the other spouse (usually her). That takes a document called a qualified domestic-relations order (QDRO), but that's well worth the $150 to $500 or more that attorneys will charge to file it. Workers who just withdraw money from their accounts and hand it over to their spouses, like Californian Bill Kirsch, will be liable for tax on the withdrawal. "She got the cash; I got the tax," he remembers. Had they done the QDRO, they would have saved close to 40 percent of the 401(k).
Options on the table: The dot-com phenom has made stock options a part of more divorces than ever before. Couples who are holding options (the right to buy company shares down the road at an agreed-upon price) may not know what they are worth, says Manhattan CPA Henry Guberman. …