401K losses

[1970tallboy]

What is the name of your state (only U.S. law)? IL

I have been gathering financial documents this weekend in preparation for meeting with a lawyer. I happened to read the posting by sweetsally and the 401K loss caught my attention. I have lost over 70K in my 401K since my marriage began 22 months ago. This comes close to offsetting most, if not all, of the equity that was built up during my marriage. Does this mean there would be little to no marital property?

On the surface, I can't imagine a judge looking at my 100K salary and let me walk away with everything I earned since we have been married. But it would certainly places me in a much different negotiating position.

 

[Ohiogal]

What is the name of your state (only U.S. law)? IL

I have been gathering financial documents this weekend in preparation for meeting with a lawyer. I happened to read the posting by sweetsally and the 401K loss caught my attention. I have lost over 70K in my 401K since my marriage began 22 months ago. This comes close to offsetting most, if not all, of the equity that was built up during my marriage. Does this mean there would be little to no marital property?

On the surface, I can't imagine a judge looking at my 100K salary and let me walk away with everything I earned since we have been married. But it would certainly places me in a much different negotiating position.

How much did you contribute to your 401k over the last 22 months?

 

[1970tallboy]

How much did you contribute to your 401k over the last 22 months?

I have contributed just over 28K since marriage and continue to contribute.

 

[thedoctorisin]

Imagine that at the time that you got married, your existing 401k was split off into a separate account with no more contributions being made, and from that point on the contributions went into a brand new 401k account that is marital property, so that 50% belongs to you and 50% belongs to your wife.

This new 50%-50% 401k should be split in the divorce property settlement. The existing 401k account is entirely yours, assets and losses, and doesn't enter into the divorce settlement.

 

[nextwife]

Imagine that at the time that you got married, your existing 401k was split off into a separate account with no more contributions being made, and from that point on the contributions went into a new 401k account that is marital property, so that 50% belongs to you and 50% belongs to your wife.

This new 50%-50% 401k should be split in the divorce property settlement. The existing 401k account is entirely yours, assets and losses, and doesn't enter into the divorce settlement.

Right. So if you entered the marriage with 700 shares of XYZ fund, and now have 800 shares, you should split the additional 100 shares 50/50

 

[1970tallboy]

Right. So if you entered the marriage with 700 shares of XYZ fund, and now have 800 shares, you should split the additional 100 shares 50/50

That does make sense to me. However, I just read a quote posted on another thread that contradicts this:

No. You get half of what accrued DURING the marriage. Which means if it is worth less now than when you got married you get NOTHING.

That is why I ask.

 

[LdiJ]

What is the name of your state (only U.S. law)? IL

I have been gathering financial documents this weekend in preparation for meeting with a lawyer. I happened to read the posting by sweetsally and the 401K loss caught my attention. I have lost over 70K in my 401K since my marriage began 22 months ago. This comes close to offsetting most, if not all, of the equity that was built up during my marriage. Does this mean there would be little to no marital property?

On the surface, I can't imagine a judge looking at my 100K salary and let me walk away with everything I earned since we have been married. But it would certainly places me in a much different negotiating position.

Are you trying to say that the fact that your 401k has lost value offsets other marital assets? If so, that isn't correct.

However, you do have a strong argument that your wife should only be entitled to marital "shares" in the 401k rather than a specific dollar amount...or perhaps no share in the 401k at all since it lost value.

A really savvy attorney, with an accountant consulting could figure out the exact worth of the money you invested in the 401k during the marriage, and could make a case for her claiming half of that.

Example: As you stated, you invested 28k during the marriage. If a savvy accountant could determine that the 28k was now worth 10k (for example) an argument could be strongly made that she was entitled to 1/2 of the 10k.

It all has to do with the tracing of the money. The problem is that the cost of tracing the money and battling things out in court, is sometimes more expensive than the worth of the money.

 

[mistoffolees]

Are you trying to say that the fact that your 401k has lost value offsets other marital assets? If so, that isn't correct.

However, you do have a strong argument that your wife should only be entitled to marital "shares" in the 401k rather than a specific dollar amount...or perhaps no share in the 401k at all since it lost value.

A really savvy attorney, with an accountant consulting could figure out the exact worth of the money you invested in the 401k during the marriage, and could make a case for her claiming half of that.

Example: As you stated, you invested 28k during the marriage. If a savvy accountant could determine that the 28k was now worth 10k (for example) an argument could be strongly made that she was entitled to 1/2 of the 10k.

It all has to do with the tracing of the money. The problem is that the cost of tracing the money and battling things out in court, is sometimes more expensive than the worth of the money.

Maybe, but it could also be quite simple.

Many people set up an allocation for their 401K funds and do not change it. Therefore, they could look at the amount in the fund at the time of the marriage and determine how much that is worth today. The difference would be marital.

Not everyone does that, but a lot of people I know do. Given that $28 K was invested during the marriage, it's worth having a look at the fund before walking away from it.

 

[sweetsally]

Are you trying to say that the fact that your 401k has lost value offsets other marital assets? If so, that isn't correct.

However, you do have a strong argument that your wife should only be entitled to marital "shares" in the 401k rather than a specific dollar amount...or perhaps no share in the 401k at all since it lost value.

A really savvy attorney, with an accountant consulting could figure out the exact worth of the money you invested in the 401k during the marriage, and could make a case for her claiming half of that.

Example: As you stated, you invested 28k during the marriage. If a savvy accountant could determine that the 28k was now worth 10k (for example) an argument could be strongly made that she was entitled to 1/2 of the 10k.

It all has to do with the tracing of the money. The problem is that the cost of tracing the money and battling things out in court, is sometimes more expensive than the worth of the money.

HEY!!!!! I made this same argument yesterday when I asked for help. You and Ohiogal tried to convince me I had to share in the entire loss! Not just what was contributed while married! So which way is it??? Or do you want it both ways???

 

[LdiJ]

HEY!!!!! I made this same argument yesterday when I asked for help. You and Ohiogal tried to convince me I had to share in the entire loss! Not just what was contributed while married! So which way is it??? Or do you want it both ways???

No, I didn't and I don't think that OG did either. We both felt that you were getting a pretty good offer based on the existing marital assets. This is someone else's thread, so I won't hijack it by going into the detail on your case, but I still feel like you were getting a pretty good offer.

 

[sweetsally]

No, I didn't and I don't think that OG did either. We both felt that you were getting a pretty good offer based on the existing marital assets. This is someone else's thread, so I won't hijack it by going into the detail on your case, but I still feel like you were getting a pretty good offer.

Fair enough, I won't steal this thread. But I would invite all readers to read the thread I posted yesterday named "property distribution" and judge for yourselves in relation to the negative marital equity they discussed.

 

[thedoctorisin]

If it's a big enough fund, and you aren't trying to mix-and-match assets in the split, then it can be quite simple. When I got divorced, I just sent away to the plan administrator for their packet on acceptable QDRO language, and they had about half a dozen different fill-in-the-blank paragraphs to choose from. One of those was that the spouse was entitled to ____ percent of the present value of the contributions made from ______ through ______. Then all you do is let the plan figure out what the actual dollar amount is.