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Equitable Distribution and Annuities

Discussion in 'Division of Marital Property' started by MCGBill, Mar 23, 2021.

  1. MCGBill

    MCGBill Law Topic Starter New Member

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    Jurisdiction:
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    In equitable distribution, how would one value a deferred variable annuity if one party has that? It has reached the ten-year maturity date, and has an income rider. Current value is $139,000 if just cashed out, but if the income rider was invoked today it would be $900/month for life. It's got a Protected Withdrawal Value of $220k.
     
  2. army judge

    army judge Super Moderator

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    1 = A variable annuity's VALUE is based on the performance of it's underlying portfolio of mutual funds/investments chosen by the annuity owner.

    2 = Fixed annuities, by comparison provide a guaranteed return on one's investment choices.

    3 = Variable annuities offer a potential of higher returns, thus greater income than some fixed annuities, but there’s also the possibility of greater risk that the account will lose value.

    If I were YOU, I'd speak to a trusted investment advisor, my attorney, or my CPA.
    In fact, speaking with all three can't hurt.
     
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  3. zddoodah

    zddoodah Well-Known Member

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    In a divorce, the two parties may advance theories about how such an asset should be valued. They might even hire expert witnesses. However, the overwhelming majority of divorces are settled before trial, so the answer to your question is that it will likely be a matter of negotiation between you and your spouse. Something to discuss with your divorce attorney.
     
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  4. Tax Counsel

    Tax Counsel Well-Known Member

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    The exact details of the annuity matter, and in any valuation of an annuity there is going to be variation because you have to make a choice of the valuation method and make certain assumptions (like future interest rates, etc) to put into your computations. You'd want to retain a financial analyst if you need to argue the valuation in court.
     
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  5. MCGBill

    MCGBill Law Topic Starter New Member

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    When trying to equitably distribute the increase in net worth over the course of a second marriage for two people, is there any adjustment or formula to compensate if one person has the majority of their growth in retirement accounts and the other in non-retirement accounts?

    The retirement accounts haven't been taxed yet, so they're worth 'less' than the actual balance?
     
  6. Tax Counsel

    Tax Counsel Well-Known Member

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    Certainly in valuing the assets to be divided the tax consequences should be taken into account. All too often people don't do that, and a lot divorce lawyers are not tax experts and fail to refer their clients to tax experts to determine those tax effects.
     

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