Nolo's Essential Guide to Divorce - Emily Doskow [155]
Nothing Cynthia had read so far had said anything about the miles, so she did some more Internet research. At first she found conflicting information. One article said that frequent flyer miles were impossible to value, and one said that they were impossible to divide because they weren't transferable. Finally Cynthia called the airline and learned that they would split the miles according to the divorce documents-all Howard had to do was submit the final settlement agreement, and the company would make a new account for Cynthia and move half of the miles into it. Howard easily agreed to this.
Debts
Your settlement agreement can call for one person to take over responsibility for certain debts, but it's not binding on the creditors. That's why it's always better to get your debts paid off as part of the divorce, if you can manage it. (Chapter 10 explains more about this.) This element of your MSA should say who's going to take responsibility for what, whether it's keeping the debts or paying them off. Time limits are really important here, especially if there's going to be a payoff. Your best bet is to tie the debt payoff to the division of the assets, and make it happen all at the same time. For example, you might agree to use the proceeds of a refinance to pay off your remaining debts.
Your agreement should say that any debts either of you took on after your date of separation are that person's separate debts, and that you'll pay each other back for anything either person pays on debts that aren't theirs.
Cynthia and Howard didn't have a lot of debt other than their mortgage and the car loan on Cynthia's Prius. However, they did have joint credit cards, two with balances over $5,000. In all, excluding their mortgage they had debt of $23,000, which they agreed they owed equally. Again, Cynthia returned to the idea of paying off the debts with the refinancing of the house, and Howard argued against a sale or buyout. Again, they agreed to table that discussion until they'd reviewed all of the issues.
Retirement Benefits
Retirement benefits are a big issue in most divorces-in some families, they are even more valuable than the family home. If you're going to divide the benefits, you'll need a Qualified Domestic Relations Order (QDRO), which is explained in Chapter 10. Then, your MSA will say how you're dividing the benefits and state that you'll have a QDRO prepared-including who will prepare it for you, how the preparation will be paid for, and when it will be accomplished. You'll need to follow up to make sure all of that happens, as described in Chapter 15.
If you're each keeping your retirement benefits, the nonemployee spouse will need to sign a waiver of rights, which you'll get from your own plan administrator. Your agreement should set out deadlines for accomplishing those tasks, too. Your MSA should state the value of each person's benefits, how the value was arrived at, and what you're doing to equalize assets, if anything. The sample agreement shows how an agreement might look when spouses keep their own retirement plans.
If you are transferring IRAs, your agreement needs to state that the transfer will be made "trustee-to-trustee," which is another way of saying that you are rolling it over into another account. Otherwise you could end up owing tax and penalties, as described in Chapter 10.
When Howard and Cynthia began discussing retirement benefits, the pieces began to fall into place. Everything they read gave them the same advice: Hire someone to value your pensions! Through his work, Howard knew an actuary firm and he located an actuary who specialized in valuing pension benefits in divorce. Howard and Cynthia both asked their human resources departments for current retirement benefit information and passed it along to the actuary. In about ten days, she gave them a summary of the present value and marital shares of their retirement plans.
The marital share of