{3:00 to read} One of the more peculiar decisions that people sometimes have to make when divorcing, is whether to create what is called a separate interest pension order. This is a particular type of arrangement where the spouse who has a monthly pension plan agrees that the other spouse will receive a portion that is totally separate. In practical terms, what that means is one spouse can collect their benefit, without waiting for the other spouse to retire.
This arrangement is available in corporate and union pension plans but not in any government plan, whether it’s federal, state, municipal, or the military pension plan. In those plans, the other spouse must wait until the participant actually files for retirement before they can receive any payment. In a corporate or union plan, there is a special option that allows people to say, “We don’t have to be tied together anymore. We’re going to create totally separate pension rights.” This way, each spouse can take their money when they want to, without having to wait for the other.
The separate interest pension allows people to be more fully separated and not have to deal with each other in any way, shape, or form after the divorce, if that is what they want. It certainly makes it a little bit easier for people who have difficult problems communicating, which, in fact, is one of the biggest reasons their marriage ended.
The separate interest approach does not require the participant to select any special form of payment. They can take the 100% option or they can provide survivor benefits to a new spouse. This is not possible, however, in the shared interest approach, so any subsequent spouse is essentially out of luck. Again, separate interest creates more room for both parties to do what they want without any further interference in their decision-making.
There are some very unusual situations where a shared interest approach might make more sense. One of these is when the alternate payee is terminally ill. Another is when the alternate payee is much older than the participant. Under the shared interest approach, the participant recovers the alternate payee’s share in the event that the alternate payee predeceases the participant, which in those two scenarios might be more likely than not.
These decisions are obviously critically important to the financial well-being of the couple and should be discussed thoroughly by the attorneys or mediators involved.
Steven L. Abel, Esq.
101 South Broadway
Nyack, NY 10960
(P) 845-638-4666
(E) [email protected]
