Generally, the key community property assets accumulated during marriage are the house and the pensions. There are normally two types of pensions: Defined Contributions and Defined Benefits. Normally the Defined Contribution retirement programs are easy to evaluate. What a spouse contributes plus interest and employer contributions, is what the spouse can draw out at a certain age.
In order to understand a Defined Benefit Plan, talk to the plan administrator and read the plan, as the language can be difficult to read. The value of the Defined Benefits is not always apparent.
Some key questions the out-spouse needs to answer are: What is the monthly payout amount? What is the actuarial appraisal value at the time of anticipated retirement? When is the earliest payout date for the employee spouse? Does the pension receive a cost-of-living adjustment increase periodically? Are there any survivor benefits? What is the cost of these survivor benefits?
It is hard to value a defined benefit pension without a professional actuarial appraisal. The best estimate is to find out the cost of an annuity that pays out an equivalent amount. However, this is only important if one the pension earner wants to buy out the “out spouse.”
Finally, if the out-spouse does not have any financial need for a buy-out, the easiest solution for him/her is not to accept a buyout but divide the pension in kind. The out-spouse should accept his/her 50 percent of the community property pension accumulated during the marriage.
