The Akiona Law Podcast: Featuring Marques Lang

In this episode of the Akiona Law Podcast, Ululani “Lani” Akiona speaks with lawyer, book author, certified financial planner, certified divorce financial analyst, and certified QDRO specialist Marques Lang of Pacific Northwest QDRO, LLC. Lani and Marques cut through the legal jargon of a QDRO (qualified domestic relation order), explaining what it is, the type of retirement accounts or pension it applies to, why you may need one in your divorce, and the importance of bringing a QDRO person into your divorce before your final orders are entered. 

Transcript

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5, 4, 3, 2, one. Hello, and welcome to another episode of the Akiona Law Podcast.

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We're in, we talk about anything and everything that intersects with the areas. Family law and divorce.

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And today we're going to be talking about a scintillating topic. And it's called quadrils.

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Which stands for qualified domestic relations order and with me I have quadruple expert attorney Roll Attorney Extraordinary Extraordinary.

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Marcus Link! Welcome to the show, Markcus.

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Alright, thank you for having me.

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Okay, so Marcus is he started. Pacific Northwest Quadrant. And again, quadril stance stands for qualified domestic relations order.

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So he focuses on reviewing, drafting, and advising on these quadrils and similar orders.

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He is a certified financial planner. He is a certified divorce financial analyst. He is a certified specialists and I didn't know this and I just found this out today that he is the author of the of Amazon's number one bestselling book, Marital, how to successfully divide, retirement plans in divorce.

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Oh my gosh, Marcus, you are such a smart pants.

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Yes.

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That's a mouthful. When you read it like that, I was like, who are you talking about?

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I know, oh my gosh. And, it was a Well, I've got so much things going on my mind right now that it's hard for me to kind of focus and pick one thing.

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Okay. So, I guess let's start off with.

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Normally I'm trying to think like what's the best way to start off because when you hide when you and I met at the club your professionals of Washington and your conference and I found out you were Quadro attorney.

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Marcus and I had a chat where basically I was like, well, what, made you get into this because it's 1 of those things where do you when you grow up Do you grow up on it?

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To say, yeah, I wanna draft a domestic retirement relation orders from beginning. So Connie, can you tell us about how you got?

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I don't know, you tell me, should you tell us how you got into us into this or what is the domestic relations order?

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All right.

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Let's go all the above. So. How I got into it was kind of accidentally on purpose.

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Hey!

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When I was in, in the fray of it all, it seems kind of foreign, but now looking back on it, it all makes sense.

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I started my career in earnest, working in human resources management, in employee benefits. So I was doing a lot of advising on retirement plans, health insurance, life insurance, and that type of thing.

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Wait, let me ask you this. Was this after law school?

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Okay. Okay.

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This was before law school. So this was before law school and it went into my 1st year of law school.

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From there. It's kind of funny. I was I was going through the normal law school clerking.

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Type of thing and I came to the realization that I did not want to be a lawyer.

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Which the universe promptly mocked me, but it was like, okay, I'll go along with this for a little bit.

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And so I quit all my jobs, during my second year of law school. And I did a concurrent graduate program in financial planning.

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When I

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Wow. Wait, wait, wait, I got back the subject. You were going to law school and you did some sort of program and financial planning?

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That's right.

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I'm a bloody for punishment.

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Okay, see you are smart pants. Okay. Okay.

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So once, I completed that program, I, hung a shingle as a financial planner, doing comprehensive financial planning, finance investments, major purchase, estate planning, the whole, the whole gamut of all of that.

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I was doing that for several years. And it really wasn't scratching my itch like it used to.

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So I was looking for a way that I could combine my financial experience. With my legal background.

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So I was talking, I was speaking with another collaborative attorney. Who was like, hey, you know, you have all this experience.

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What have you ever considered? Being a financial neutral and collaborative cases.

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Okay, you gotta explain what is the financial neutral and collaborate cases.

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Okay.

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So a financial neutral and a collaborative case is. Somebody who comes in and analyzes the the cash flow of the parties they can advise on division of assets they can provide various proposals to make sure that, you know, based on the terms of the set the divorce settlement, what will the party's financial situation look like moving forward?

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So in a collaborative divorce attorney say, hey, how'd you thought about being a financial neutral and your response was yeah.

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Yeah.

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Okay.

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Not exactly. My response was, huh, what's collaborative? And after that, you know, I was like, you know.

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That's not quite what I wanted to do to the piece of the financials that I really enjoyed was working with people on really identifying their values, their goals, their needs, their fears around money.

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And then just using the money as a tool. I didn't want to necessarily be doing financial projections and monitoring markets and that type of thing.

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But what it did lead me down the path was. Quadros and I was like that's a perfect niche because you have these 2 complex laws on the federal level, ERSA, and the tax code.

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It's people's retirement plans are their 1st or second largest asset behind the house. And it was still very legal intensive.

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So from there, I started doing a bunch of informational interviewing. And I really got a good sense of it.

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So I accepted the position working as in a firm that was a 3rd party administrator where all I did all day long was review quadros, approve them, implement them, from the plan administrator lens.

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I would draft the quadrant procedures, I would draft the model quadro's, and once I knew that that was kind of my thing, I went out and, and, started, went back to take the bar exam because I skipped over that when I graduated law school.

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Oh.

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I took the certified financial planner exam instead. And started doing quadras. I've been doing that ever since.

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Okay. I'm still kind of absorbing in the fact that you said you drafted model quadr.

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Cause that, okay, so now you gotta go and explain is, you know, what is a quadro and the purpose is why you need one because it's so hard for me as a Yeah, I don't need to even.

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Say, I mean, you talked about Arissa, right? So I think first, st you know, you wanna start off saying like, okay, what is the risk of scan for and.

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And such.

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Okay, yeah.

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Yeah, so what is, we'll start with what is a quadrant. So, a quadru is a qualified domestic relation order.

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Which is an order that allows a spouse, a former spouse, a child or another dependent of a retirement plan participant.

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To receive assets from. A retirement plan. And the reason why this this order becomes necessary is because under Arissa, which stands for the employee retirement income security act of 74 so so that that law governs retirement plans and when it was initially constructed it did not account for retirement plan assets also being a marital asset.

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Hmm.

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So that was amended in 19. I wanna say 83 or 84. To allow for qualified domestic relations or there so that those that ex spouse has the ability to obtain retirement plan assets.

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Because one, and that they needed to overcome was the anti-alienation, provision, which means You know, if you are a participant in a retirement plan, you cannot transfer these assets to some other 3rd party.

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Or they cannot be attached to.

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Okay, maybe I'm going off too much for the, but like why? Why couldn't you?

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Like if it's my retirement, how come I can't transfer it to 3rd party?

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That's just how the law was written at that point in time. And You know, it took some debate, which is why it was ultimately amended.

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Between, cause you have to think when a risk of 1st came about really they were focused on protecting retirement income security right retirement income security because in the in the in the years before.

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Yeah.

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This law was enacted, you could go to work for a company, they would promise you a pension or some other type of retirement benefit.

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And if. They decided, oh, we're gonna fire you on the day before you're eligible or we're gonna file for bankruptcy or whatever the case may be, you would be left without any type of retirement.

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Outside of social security. So it was really geared towards protecting working-class people and and and providing an income stream for them when they were in retirement.

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I didn't know that. Thank you for that. I mean, I was born in 1971, so yeah.

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That's not say that out loud.

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I know, That's interesting, that makes sense. That's okay. So that's why they did it.

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And but then afterwards, and they decided like, hey, now we've got allow for this transfer for the spouse.

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I always kind of describe quadrils as well. It's a it's a document that you need which allows your husband to give you his retirement assets.

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Yep.

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That's kind of my Not some votes thing, but okay, before I get why do sometimes People call it a draw, domestic relations order.

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Is it just because it's easier to say?

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Oh.

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No, so these actually have specific meanings. So. A domestic relations order is the actual order that allows the retirement plan asset to be divided.

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However, you have separate parties. So that's the domestic. Domestic relation, or the, or drow is the statutory definition.

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Hmm, okay.

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However, The statute alone does not qualify the order. And so the only the plan sponsor, which is, you know, the business or the company who created the retirement plan.

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Cool.

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Okay.

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And qualify the order to make sure that it complies with the terms of their specific plan. So, a drow does not become a quadro until the plan sponsor or the plan administrator.

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Actually does the qualification.

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Thank you so much for explaining that. I didn't. So it's a, it's a drill and then we send the domestic relations odor to the plan administrator administrator and then they say okay we like it and then becomes qualified and you can enter it with the court.

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And then. Thank you, Markets, for cleaning.

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That's right. That's right. And you know what? And when we're speaking about qualification.

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Yeah.

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Really what that term comes down to is the favorable tax treatment of retirement plans. So when a business starts a retirement plan, let's say it's a 400, and onek, it's a qualified retirement plan because they receive favorable tax treatment where they can deduct anything that they put in and same for the participants if you you know have a contribution out of your out of your paycheck you receive an immediate tax

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deduction. So when we're speaking of qualification it's akin to speaking of the tax status of the plan or the or the monetary transaction.

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And didn't you correct me if I'm wrong, but did you work for the IRS at 1 point?

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I did not work for the IRS.

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Okay, but no, I thought when we were talking you kind of did something in terms of, maybe I thought you did something in terms of knowing this tax stuff.

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In your

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Okay.

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So, you know, I was the nerd in law school who took tax classes with like 4 other people.

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Okay.

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So that's where a lot of the experience comes in and then just my ears as a financial planner you know you have to study the text code and how that different context.

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Hmm, okay. Okay. Well, math is not my strong suit, so. I'm always just amazed when people choose this as part of their Yeah, this is gonna be my niche in my practice area, so to speak.

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So. So I think you touched upon why you may need a qualified domestic relations order in your divorce because it has to do when if your spouse has a retirement account.

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That's right.

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It's a way for you to get those retirement assets. Transfer to you. Okay, so can you speak to so one of the things that we talk about as an attorney when we're talking about doing the retirement and as it relates to the domestic relations order is is a retirement going to be distributed as a fixed dollar amount versus a percentage.

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So can you kind of speak to that distribution piece?

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Please, please.

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Sure. So. Let me rewind just a moment just for context. So when we're talking about retirement plans, there's really 2 main types of plants.

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So 1st we have your defined benefit plan. Now in a defined benefit plan, this is akin to a pension.

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We see these primarily with union workers, with federal employees, state employees, etc. A lot of defined benefit plans are you know kind of going by the wayside but the main features of a defined benefit plan is that you know you work for so long, you make so much money.

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And at the end of that period of time, your employer guarantees you would particular benefit in the form of an annuity.

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For the rest of your life after you retire.

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And annuity, which is a pension, essentially.

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Right. Exactly, exactly. And then on the second category is a defined contribution plan. Now this is where the employer will provide the plan.

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However, the ultimate benefit that you receive in retirement is no longer up to the employer to make good on.

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It's dependent upon how much you saved. And how prudently you invested the assets in order for them to grow over time.

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So really what it comes down to is who has the risk of providing the benefit and the defined contribution is the individual.

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On the defined benefit, it's the employer. So with that groundwork, so under, go ahead.

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Okay. And let me pause you for a second. I'm just gonna Put in in my attorneyly person, not good at these types of things.

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Is that the way I normally talk about when I talk about with people, is the defined benefit as a as a pension, annuity and with the defined contribution we're talking about for one case.

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Right? Okay.

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Correct. For the most part, yeah, that's right.

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For the most part, yes.

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Yes. Yes, that's well, there are a lot of different types of, you know, 4, 0 1 k, to, clients.

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Yes. Yes.

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So it's a 4 1 k is the one we all know about. There's also 4 or 3 B's, there's profit sharing plans, there's employee stock option purchase plan, so on and so forth.

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So not to boggy down with all the nerdy details that I like to get into.

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I know that's I'm trying to keep a more simple lay person, you know. So, okay, so go ahead.

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Yeah.

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Now you've laid down that groundwork.

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So when we're talking about a risk. And having a domestic relations order. There's 3 main ways that these plans can be divided, which is as you mentioned, one is a is a fixed dollar amount.

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So if we're talking about a defined contribution plan like a 4 1 k. You know, it can say, hey, X spouse is to receive $50,000 out of this particular.

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Right.

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Okay. Pretty straightforward. On the on the pension side, it's, you know, ex spouse is to receive this dollar amount of the earn, of the annuity that was earned during the working life of the person that overlaps with.

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Yeah.

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The the. Percentage is similar in that but instead that's all you're getting so with a 4 1 k for example They're valued.

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Pretty periodically a lot of them are valued daily. As long as the financial markets are open.

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So if you look at it as of, you know, April, 29, th 2024, your account balance is a hundred $1,000.

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20%

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And ex spouses to get you know, 50%, for example. That would also equate to you know, $50,000.

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Based on this example. But there's, it's just a different way of, calculating the award and that.

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You do that for, you know, a variety of different reasons. You know, what's the purpose?

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What's the history of the of the of the parties? Maybe, you know, somebody. Was paid off a debt and they wanna be reimbursed the specific dollar amount for the payment of that debt, but the other spouse.

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Hmm.

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So you'd put in the specific dollar amount. With the percentage you know you can you can do that as well so it really there's some strategic elements to whether or not you use a fixed dollar or a percentage that that really is case by case but when it comes to getting the domestic relations order, implemented, generally you see those 2.

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Now, I mentioned the 3.rd I mentioned the 3.rd

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Okay.

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Wait, I have a I had a question about the 2. But should you go to the 3rd and then I go back to my question?

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No, let's hit the question.

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I don't know. Oh my question was gonna be and then maybe this goes to the 3rd where Is there a benefit to using to, okay, I know you talked about using the fixed dollar amount.

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Let's say if there's some sort of like pay me back for this money, but let's just say it's not, right?

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And we're just trying to achieve that. 50, 50 division of assets and deaths. So rather than saying give me $50,000 from your $100,000 for one K Should we just say give me 50% or that situation?

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It doesn't really matter. Dealer's choice.

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Okay.

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Yeah, in that situation it is dealer's choice. Now, When you are talking about these types of divisions, especially with a for with a defined contribution plan, there are other factors at play such as whether or not there has been there have been any loans taken out.

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Because that you are invested in the market, there's always going to be market fluctuations in the accounts value.

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Alright.

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That occur between the time that you guys negotiate whatever the dollar amount is to the time of divorce to the time that the drow is qualified as a quadro to the time that the ex spouse.

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Is able to actually receive the fund. So you're gonna wanna account for what happens. How are we gonna divide or not divide those market fluctuations during those 2 at those intervals of time?

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So is that okay when you're talking when you talk about the market fluctuations right okay so let's say as an example $100,000 in the account at the time of the party's agreement.

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Right.

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Okay, 50 50 split, right? So I get $50,000 and then between the time that the money gets that.

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That decision was made until let's just say the wife gets some money. The husband's retirement account dropped where now she only has $80,000, but because the drawl says wife gets 50 to include market fluctuations and losses.

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That's why she gets the $50,000 still, even though it drop down. Okay.

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Not still. So that's a variable that would need to be accounted for. So if the market goes down.

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Yeah.

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And you say wife is receiving 2 receive a fixed sum of $50,000 not adjusted for gains and losses, she receives that $50,000.

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Not adjusted for gains or losses. Okay. Yeah.

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Now, if it is adjusted for gains and losses, she would share proportionally in that decline.

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I was just trying to think if Okay, so let me think about this way. Let me. So should we.

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In our drools. Say, okay, you get $50,000 not to include capital not to include losses your gains as opposed to to include losses or gains.

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It's 3.

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Okay.

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You know, there on this particular point, there's no real should. It's really a matter of negotiation and client preference.

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Hmm. Hmm.

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You know. Personally, more my bias lays. I understand both, but where my bias laces, you know.

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There's always going to be those market fluctuations. On the amount that's considered marital.

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So why not include them? Because then they can share in those market fluctuations.

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Good or bad.

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Good or bad? But there's risk, you know, some people they really need that $50,000 and I can't have it drop down to 40 because otherwise I'm not gonna be able to put a down payment on a new house or whatever the case may be.

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Alright.

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So, so it really is a case by case situation, but the important part. For folks is to address whether or not they are going to include those gains and losses or not.

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Okay, and that would go either way in terms of the fixed dollar amount or the percentage just does include the gains or losses.

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That's right. That's right.

00:24:38.000 --> 00:24:57.000

But so, but I mean. So again, is there is there no real I guess strategy to get a fixed dollar amount versus percentage aside from the fact that there's a loan.

00:24:57.000 --> 00:24:58.000

Okay.

00:24:58.000 --> 00:25:07.000

So the loans are the big things on for the defined contribution plans. Because if you have a loan, what the plan administrator will do is they're gonna value the account based on how you tell them to handle the loan.

00:25:07.000 --> 00:25:14.000

So let me give you an example just to drive reinforce this. So let's say you have an, 4, 0 1 k balance worth a hundred $1,000.

00:25:14.000 --> 00:25:23.000

There is a $20,000 loan that the participant took out. Okay. So then we have a net.

00:25:23.000 --> 00:25:27.000

Yeah.

00:25:27.000 --> 00:25:28.000

Right.

00:25:28.000 --> 00:25:37.000

Account value of $80,000. Right? So assuming this 50%. Award If the loan is included.

00:25:37.000 --> 00:25:47.000

What the plan administrator is gonna do is they're gonna take that that $100,000 and they're gonna divide it by 50% right so each party will receive their 50 K.

00:25:47.000 --> 00:26:00.000

Now, if the loan is excluded, what they're going to do is they're gonna before making the transfer, They're gonna subtract that $20,000 out of the balance.

00:26:00.000 --> 00:26:13.000

Right, so now we're talking about the 80 and that 50% A just went from 50,000 each when the loans are in included to 40,000 each.

00:26:13.000 --> 00:26:25.000

Okay, so I get that in terms of the percentage. If we're talking about doing dividing a firm one K of a hundred 1,000 and then I'm doing it like 50% and there's a loan.

00:26:25.000 --> 00:26:31.000

But let's just say, let's just say I had, okay, I can sum up my thoughts.

00:26:31.000 --> 00:26:57.000

$100,000 same scenario $100,000 for onek husband took out a $20,000 loan i know this and so i'm telling my client okay we're gonna ask for $50,000 because even though his 4 1 cases it's got $80,000 we're going to include that loan and that's why I'm going to say $50,000 then I don't have to worry about the loan language Right?

00:26:57.000 --> 00:27:00.000

That's right. That's right.

00:27:00.000 --> 00:27:06.000

You're nailing this. You should give yourself more credit.

00:27:06.000 --> 00:27:07.000

Yeah.

00:27:07.000 --> 00:27:11.000

Okay, few! Oh my. I'm give me give me a gold star Okay, now. What was your 3? rd

00:27:11.000 --> 00:27:17.000

Point that you were gonna say before I interrupt it.

00:27:17.000 --> 00:27:18.000

Okay.

00:27:18.000 --> 00:27:23.000

Yes, so the 3rd way to divide a retirement plan this this mostly applies to as a practical matter this mostly applies to the pension plant.

00:27:23.000 --> 00:27:29.000

Okay, pension plans.

00:27:29.000 --> 00:27:30.000

Okay. Okay.

00:27:30.000 --> 00:27:31.000

And that is to use. A fraction or a formula. This is most commonly called a covature fraction.

00:27:31.000 --> 00:27:41.000

I practice in different jurisdictions. So each jurisdiction kind of has their own case for how they call this.

00:27:41.000 --> 00:27:42.000

Okay.

00:27:42.000 --> 00:27:55.000

But basically what the fraction does is it divides the total pension benefit between marital and non marital.

00:27:55.000 --> 00:27:56.000

Okay.

00:27:56.000 --> 00:28:00.000

And then from there, you're splitting. The marital portion accordingly.

00:28:00.000 --> 00:28:08.000

Okay, and are you talking about now a pension valuation? Is that what they do?

00:28:08.000 --> 00:28:09.000

Okay.

00:28:09.000 --> 00:28:18.000

That's a little bit different from a pension valuation. So with a pension valuation is, okay, maybe, you know, the person who earned the pension does not want to give that up.

00:28:18.000 --> 00:28:28.000

Right? They want to keep all of their pension. So you would do a pension valuation in order to determine, okay, If that's what you want to do, fine.

00:28:28.000 --> 00:28:47.000

But what is the present value? Amount well what is that pension worth today and present dollar. So you know, so let's say somebody is getting a pension of, you know, $2,000 a month from the time they retire till the time of the day.

00:28:47.000 --> 00:28:48.000

Right.

00:28:48.000 --> 00:28:52.000

Well, we need to figure out what that value is. And depending on a variety of factors, you could come up with a value there.

00:28:52.000 --> 00:29:02.000

And what that present value does is it allows you to then offset the value of the pension with other marital assets if they're available.

00:29:02.000 --> 00:29:11.000

So, so frequently what we'll see is, okay, party will keep all of their pension and the other party will get the house, for example.

00:29:11.000 --> 00:29:17.000

To offset the value that they're not getting directly from the pension.

00:29:17.000 --> 00:29:36.000

Okay, so when we're talking about this 3rd way. When we're talking about the dividing the pension, the covert, the coal rancher, can that apply to If someone is an active pension payout status.

00:29:36.000 --> 00:29:37.000

Yeah.

00:29:37.000 --> 00:29:44.000

That could. So either way, whether someone is anticipating a pension benefit received or if they're an active payout status.

00:29:44.000 --> 00:29:54.000

You do this curvature fracture. Okay, again, I don't understand. Why would you want to do the curvature fracture as opposed to like a dollar amount or percentage.

00:29:54.000 --> 00:29:59.000

But like, is there benefit or?

00:29:59.000 --> 00:30:00.000

Yes.

00:30:00.000 --> 00:30:06.000

Sure, so pensions have a lot of moving parts. And so if you use a straight dollar amount to divide, mention.

00:30:06.000 --> 00:30:17.000

If there are any early retirement subsidies, if there are any post retirement adjustments, if there are any cost of living adjustments.

00:30:17.000 --> 00:30:27.000

The alternate payee who's, you know, or the ex spouse. Is not going to receive a share of that.

00:30:27.000 --> 00:30:42.000

If you use a percentage, you know, those types of adjustments are kind of baked in. But oftentimes why this is used is because, you know, folks.

00:30:42.000 --> 00:30:43.000

Right.

00:30:43.000 --> 00:30:44.000

Are getting divorced before they become eligible for the pension. So there's this time element of, okay, and so then you have the other factor that you have to.

00:30:44.000 --> 00:30:57.000

Consider is how pension benefits are calculated. Normally it is a combination of how long you worked with the company.

00:30:57.000 --> 00:31:08.000

How much money you made during the company, whether that's, you know, your highest salary or some will do, you know, an average of your highest 3 year salary, whatever that might be.

00:31:08.000 --> 00:31:17.000

By and then they multiply that by some type of multiplier that can be, you know. 1%, for example.

00:31:17.000 --> 00:31:25.000

So as somebody can to work, presumably their earnings continue to go up. And their years of service continue to go up.

00:31:25.000 --> 00:31:35.000

So that ultimate pension benefit in the end is going, it really shoots up and value the closer you get to retirement.

00:31:35.000 --> 00:31:44.000

So you use this to say, okay, well. We divorce now. And I'm, let's say, 45.

00:31:44.000 --> 00:31:53.000

I'm not gonna retire for another 20 years. So we're gonna lock in how long we were married, right?

00:31:53.000 --> 00:31:54.000

Okay.

00:31:54.000 --> 00:31:55.000

This is gonna be the numerator of this fraction of formula. How long were we married that I worked here?

00:31:55.000 --> 00:32:06.000

Let's say it was 10 years. Okay, so 10 years we were together. And I worked at this company.

00:32:06.000 --> 00:32:11.000

On the bottom, we're gonna have the total amount of years that I worked at this company. Let's call it 30 years.

00:32:11.000 --> 00:32:12.000

Okay.

00:32:12.000 --> 00:32:20.000

Okay, so a 3rd of this ultimate pension benefit is gonna be considered marital. And then you're gonna divide.

00:32:20.000 --> 00:32:25.000

That 1 3rd portion. As part of the marital settlement.

00:32:25.000 --> 00:32:40.000

Okay, as part of the marital settlement. So are you saying then to use this curvature fracture if you've got someone who has a pension and is 45 not looking to retire in 20 years then then do this.

00:32:40.000 --> 00:32:41.000

It's certainly an option. It's, it's an option in all of them.

00:32:41.000 --> 00:32:52.000

It's, you know, where, push back comes in with the fraction as some people think that, you know, hey.

00:32:52.000 --> 00:32:59.000

I kept working post-marriage and I don't think anything that happened post-marriage should be included.

00:32:59.000 --> 00:33:02.000

Right.

00:33:02.000 --> 00:33:03.000

Yeah.

00:33:03.000 --> 00:33:11.000

And you know and and I understand that. What the fraction that is doing though is the longer you work you know the smaller that marital portion is ultimately going to be from a mathematical standpoint.

00:33:11.000 --> 00:33:18.000

You know, if you worked, if you were married for 10 years, right, and you worked for 30 years, it's gonna be 1 3.rd

00:33:18.000 --> 00:33:25.000

If you were married for 10 years and you worked for 40 years, that marital portion is going to be one quarter, so on and so forth.

00:33:25.000 --> 00:33:33.000

So it does really divide them, but people sometimes don't aren't comfortable with that and don't think that's equitable because, you know.

00:33:33.000 --> 00:33:52.000

Really all that accrued. That really the only part that's considered marital is the part that the crude while we were married and you know, I understand that so Not to get too nuanced, but so we have what's called a frozen curvature, which means we're gonna sever this benefit as of the data divorce.

00:33:52.000 --> 00:34:05.000

Done, frozen. That's all we're dividing. And then we have a true covature, which is what I explained in the beginning, which takes into account the full, working life of the participant.

00:34:05.000 --> 00:34:10.000

Wow. Good. Yeah, what are you saying?

00:34:10.000 --> 00:34:14.000

So really what I'm saying is Bring the quadrant person on early.

00:34:14.000 --> 00:34:25.000

Yeah, I this is I was thinking here I was like okay So if I'm delicious, I'm representing the husband that has the pension.

00:34:25.000 --> 00:34:32.000

I would be telling him, do the curvature fracture because that's actually going to result in a less payout to you.

00:34:32.000 --> 00:34:38.000

Over time and if I was presenting the wave I'll be like girl get your money up front now to the Okay.

00:34:38.000 --> 00:34:50.000

Yeah, yeah, yeah, yeah, potentially. So, so really how I like to explain this is and it's gonna be up to your clients, right?

00:34:50.000 --> 00:34:51.000

Hmm.

00:34:51.000 --> 00:34:55.000

It's like, G, you want to. Have a bigger piece. Of a smaller pie. Or do you want to have a smaller piece of a bigger pie?

00:34:55.000 --> 00:34:58.000

And that's, you know, that's it's really case by case in situation, the situation.

00:34:58.000 --> 00:34:59.000

Hmm.

00:34:59.000 --> 00:35:06.000

There's no way the wrong answer. It's just a matter of, you know, what type of agreement you guys can come to.

00:35:06.000 --> 00:35:13.000

Yeah, it's just, so this is, like in full disclosure, this is what I do usually as a divorce attorney.

00:35:13.000 --> 00:35:20.000

And I think this is why in terms of collaborative divorce, it's so exciting and collaborative wars.

00:35:20.000 --> 00:35:31.000

We kind of touched upon it, but it's essentially it's a divorce where people sign an agreement that they're not gonna go to court, engage in divorce litigation to resolve their divorce.

00:35:31.000 --> 00:35:41.000

They're going to resolve the divorce outside of court with it within the collaborative voice container which is too collaborative divorce attorneys.

00:35:41.000 --> 00:36:05.000

You can use a divorce coach which is there in a way as your. Emotional translator mediator to kind of step in when things get too high or you're so frustrated and you scream at your spouse you know you asshole you you just want me to have anything and the divorce coach will step in and would say hey you know Lonnie really has this fear that she's not going to be able to get by

00:36:05.000 --> 00:36:13.000

financially and then we bring the financial neutral. Which kind of says, well, this is what you can actually afford to pay husband.

00:36:13.000 --> 00:36:19.000

No, agreed you can afford to pay $5,000 in maintenance, but if you can actually forward to pay 2,000.

00:36:19.000 --> 00:36:29.000

So, so with that being inside. It kinda seems like your piece. Where you kinda come in as part of the collaborative voice team and you're like, hey guys.

00:36:29.000 --> 00:36:36.000

You know, he, this is the best way. Listen, let's not forget it. Let's not forget about the pension benefits.

00:36:36.000 --> 00:36:47.000

And what can we do to divide that pension benefit whereas a divorce attorney I'm just looking at let's get that pension valued and then I'll we'll plug it in.

00:36:47.000 --> 00:36:56.000

We'll plug it into the asset and that spreadsheet where I'm not trying to get into the curvature fracture.

00:36:56.000 --> 00:36:57.000

That's okay.

00:36:57.000 --> 00:37:00.000

I'm just like, Okay, and we'll figure it out from there. So.

00:37:00.000 --> 00:37:06.000

Yeah, so that's I don't know how many to how many divorce attorneys are aware of this curvature fracture and there's 3 different ways because again our normal MO is I'll send you off.

00:37:06.000 --> 00:37:18.000

Pension valuer, which then leads me to ask this question. Do you value pensions?

00:37:18.000 --> 00:37:19.000

I do not value pensions.

00:37:19.000 --> 00:37:26.000

Okay. Okay, alright, glad we got that out of the way.

00:37:26.000 --> 00:37:40.000

Yes. You know, it really is, an individual case by case situation. It really is and and you're always trying to balance that with the terms of the individual plans.

00:37:40.000 --> 00:37:49.000

So I think a couple of things that make domestic relations orders so complicated is there's just a lot going on.

00:37:49.000 --> 00:37:50.000

Yeah.

00:37:50.000 --> 00:37:57.000

Okay, you have these federal laws, rissa and internal revenue code. That's scary.

00:37:57.000 --> 00:37:58.000

Yeah.

00:37:58.000 --> 00:38:06.000

You might have the code of federal regulations involved, say if you have a federal employee and they have a thrift savings account.

00:38:06.000 --> 00:38:13.000

You know, the code of federal regulations might be involved. Then you have this individual state loss. Right? That vary.

00:38:13.000 --> 00:38:31.000

And then if that's not enough, just for good measure, Each plan is unique. So just because you negotiated a settlement on plan A that worked out well doesn't mean that same settlement will work for plan F.

00:38:31.000 --> 00:38:35.000

Because that plan might be different.

00:38:35.000 --> 00:38:42.000

Okay, I think that just goes why to why divorce attorney should not be doing domestic relations orders. Huh. Let me ask you this question.

00:38:42.000 --> 00:38:43.000

Yeah.

00:38:43.000 --> 00:38:51.000

How do, how do market fluctuations affect the gains and losses when we're talking about.

00:38:51.000 --> 00:38:56.000

Retirement accounts.

00:38:56.000 --> 00:38:58.000

How do market fluctuations address the gains and losses? Well, we kind of, we kind of alluded to this.

00:38:58.000 --> 00:39:06.000

Yeah, Okay.

00:39:06.000 --> 00:39:07.000

Okay.

00:39:07.000 --> 00:39:08.000

So, you know, when When the markets up so If let's go stick with that $100,000 value, right?

00:39:08.000 --> 00:39:09.000

Yeah.

00:39:09.000 --> 00:39:18.000

If the market's up and save by the time, you know, the Quadro's drafted and approved, that account balance is now worth a hundred 10.

00:39:18.000 --> 00:39:22.000

Okay.

00:39:22.000 --> 00:39:23.000

Yeah.

00:39:23.000 --> 00:39:26.000

Well, we have this $10,000 difference, right? So. Depending on the language that's incorporated into the order.

00:39:26.000 --> 00:39:36.000

If we're going to include earnings and losses, then the ex spouse is gonna receive a portion of that $10,000 game.

00:39:36.000 --> 00:39:43.000

And that happens vice versa. If it was a $10,000 loss, you know, the ex spouse would share in that loss.

00:39:43.000 --> 00:39:50.000

So if it's a 50%, you know, markets up tenk instead of getting 50,000 spouse gets 55.

00:39:50.000 --> 00:39:56.000

Markets down, you know, instead of giving 50,000 spouse gets 45.

00:39:56.000 --> 00:39:59.000

So I'm just kind of try to and we did touch upon upon this. I'm just trying to think again and the term of being like your divorce attorney.

00:39:59.000 --> 00:40:07.000

And you're in that mediation and you're having that where do you want to include the market losses and gains in terms of this retirement account division or do you want to exclude it?

00:40:07.000 --> 00:40:21.000

Cause if you excluded, you're not going to share in the loss, but that also means you're not going to share in the gain.

00:40:21.000 --> 00:40:22.000

That's right.

00:40:22.000 --> 00:40:29.000

So it also kinda, it just kinda seems like to me, it kinda depends if you're in a bear market or a bull market.

00:40:29.000 --> 00:40:49.000

And with the interest rate so high, you know, it's just so it's so hard, but sometimes it just depends because what I think what people need to understand is that when you're at mediation and you have that settlement agreement and let's just say the market is performing really well at that time.

00:40:49.000 --> 00:41:00.000

But when the distribution actually happens, could be 3 months down the road, 4 months down the road, 6 months down the road and maybe, you know, the market just flux, maybe the market takes a dip then.

00:41:00.000 --> 00:41:01.000

Yeah.

00:41:01.000 --> 00:41:05.000

That's right. That's right. And I tell you what, if you can predict when we're going to be in a bowl and bear market, let me know.

00:41:05.000 --> 00:41:12.000

I know. Yeah.

00:41:12.000 --> 00:41:20.000

I will. Yeah.

00:41:20.000 --> 00:41:21.000

Yeah.

00:41:21.000 --> 00:41:30.000

Yeah. And you know, that's and you're also speaking to the best case scenario. So one thing that does happen from time to time is sometimes you know the divorce is contentious it's it's emotional you just want to be done you don't even wanna think about this quadro thing I'm a Bob Sometimes people forget that get them done.

00:41:30.000 --> 00:41:38.000

I recently have a case. Where the parties just forced in 1998.

00:41:38.000 --> 00:41:39.000

Yeah, yeah.

00:41:39.000 --> 00:41:44.000

And we just did the quadro this year, 2024 question. Fortunately.

00:41:44.000 --> 00:41:46.000

Excuse me?

00:41:46.000 --> 00:41:54.000

It went through and everything was fine, but yes, this does happen. So being clear on those market fluctuations can have a big impact.

00:41:54.000 --> 00:42:00.000

Okay, wait a minute.

00:42:00.000 --> 00:42:06.000

Okay, I'm laughing because I'm just wondering I mean I'm not surprised I've seen it happen.

00:42:06.000 --> 00:42:17.000

I'm on the you know the domestic relations attorney Washington, I've seen it happen before. But I'm laughing because please, please, please, I hope.

00:42:17.000 --> 00:42:24.000

That included losses and gains. I imagine that would have included grown a lot.

00:42:24.000 --> 00:42:25.000

Or did it have a fixed dollar.

00:42:25.000 --> 00:42:28.000

Yeah, earnings and losses were included. So.

00:42:28.000 --> 00:42:29.000

Oh my gosh, thank God.

00:42:29.000 --> 00:42:37.000

In this particular case, but you know, if you know they weren't. It would have been a tough deal.

00:42:37.000 --> 00:42:44.000

Yeah, I know. I know what you're, oh, okay. So to kind of, to kind of.

00:42:44.000 --> 00:43:00.000

Encapsulate this or summarize it. The long end of the story is the summer is it's good to include market losses and gains because sometimes when the attorneys are out of the case And we as the attorneys are not monitoring.

00:43:00.000 --> 00:43:14.000

To make sure someone did that quadrant, that's where you can be in that situation where they, you know, they had an agreement, the final divorce orders were entered, but one party basically just sat on their butt and didn't get the quadrant because maybe they didn't reach on it and hire someone.

00:43:14.000 --> 00:43:15.000

So Yeah, they forgot.

00:43:15.000 --> 00:43:19.000

Hmm, maybe that hire one. Maybe they can't find anybody. Maybe they forgot. Maybe they don't want, you know, there's a lot of reasons why.

00:43:19.000 --> 00:43:26.000

There's a lot of reasons. So that's why. Yeah.

00:43:26.000 --> 00:43:27.000

Okay.

00:43:27.000 --> 00:43:31.000

But there's also a lot of risk. This is why I say for tell folks to get in get the quadrant person involved as early as possible because I mean just going back to that case that I had this year I mean there's a there's a 26 year gap.

00:43:31.000 --> 00:43:37.000

Yeah.

00:43:37.000 --> 00:43:38.000

Yeah. Yeah. What is?

00:43:38.000 --> 00:43:43.000

Between. Quadro being done and force being done. Well, what if somebody passes away? What if somebody, what if, what if the company goes under?

00:43:43.000 --> 00:43:49.000

Yeah.

00:43:49.000 --> 00:43:50.000

Yeah.

00:43:50.000 --> 00:43:57.000

What if somebody changes jobs and they roll the funds into another plan? What if somebody gets remarried and they're now retired and they're living on that money thinking nothing happened?

00:43:57.000 --> 00:44:05.000

What remedy does that ex spouse have and it's it's very difficult

00:44:05.000 --> 00:44:06.000

That's a lot of what it's Okay.

00:44:06.000 --> 00:44:24.000

Well, are you gonna answer those questions? That's, Like yeah, what if are you saying that's why you get the quadruple attorney involved early on because they can address those scenarios in the quadr or the quadru will make sure that doesn't happen.

00:44:24.000 --> 00:44:31.000

The quadrant will make sure that doesn't happen because let's let's look if the quad was completed.

00:44:31.000 --> 00:44:32.000

Right. Yeah.

00:44:32.000 --> 00:44:42.000

Right. With, and you know, as close and possible in time as the finalization of the divorce, you minimize a lot of those variables from coming to fruition.

00:44:42.000 --> 00:44:47.000

Okay, yeah, I was getting kinda I was stressed out for a second there. I'm like, what if?

00:44:47.000 --> 00:44:51.000

I'm here, don't stress, I'm with you.

00:44:51.000 --> 00:44:52.000

That's right.

00:44:52.000 --> 00:44:57.000

Okay, you're gonna hold my hand and tell me to breathe. It's okay. Oh my gosh, I'll spin you out of control there for a second.

00:44:57.000 --> 00:44:59.000

Okay.

00:44:59.000 --> 00:45:14.000

Phew! Okay, so in my head, and you know, I wasn't going that, long scenario, that in my head I was thinking about this divorce case I did, you know, where we, oh my gosh, my husband's a client.

00:45:14.000 --> 00:45:20.000

Great guy. This guy is so smart. He's an attorney and a CPA and he's very down to earth.

00:45:20.000 --> 00:45:31.000

Love this guy. But I was just thinking, you know, I think we did, maybe last summer and we just finalized this divorce.

00:45:31.000 --> 00:45:39.000

Couple couple of weeks ago. And, and it is whole, it's funny, but it's not funny, but it's hilarious in the sense, right?

00:45:39.000 --> 00:45:48.000

We do, we do mediation and actually I rewind. We did 2 mediations and the other side cannot come.

00:45:48.000 --> 00:45:53.000

They cannot wrap their head around. The acid and spreadsheet we cannot reach negotiations then we then reached out and we did an arbitration where we just kinda said laid out our positions.

00:45:53.000 --> 00:46:08.000

These are how the account should be divided. And so back got done and decided. But in terms of arbitration.

00:46:08.000 --> 00:46:15.000

My site had to prepare the final divorce orders. And then in the final divorce order I do an exhibit A.

00:46:15.000 --> 00:46:34.000

And I'm sorry, folks, really going down the, so bear with me, right? The final divorce orders talk about who should get what but when we attorneys like to do an exhibit A because then we can really kind of build things out and the final divorce order can say yes or yes assets are divided see exhibit A.

00:46:34.000 --> 00:46:53.000

And then we as attorneys can just put in all this great language in your exhibit A. And one of it has to do, I like to do it when I say, yes, we have an entire account, it's going to be prepared and here are some great fabulous, cut, you know, quadrants that the parties are gonna use to prepare these drawers.

00:46:53.000 --> 00:46:58.000

And they're gonna pay Marcus Lank 50 50 to do it. Where am I going with this?

00:46:58.000 --> 00:47:04.000

I just lost my train of thought. Okay. But even in terms of that, right? I can have that in the settlement agreement, but but 6 months like can pass between that.

00:47:04.000 --> 00:47:21.000

Settlement agreement and we could have Marcus Lang listed between when Mark is Lanking out you do the drawer because then they're still fighting going on.

00:47:21.000 --> 00:47:30.000

About the language and exhibit A. So that was going, so I wasn't going, I guess, as far down the road as 20 years that pass.

00:47:30.000 --> 00:47:38.000

I'm just, my world was like, yeah, I've been in cases where we can have it, a subtle agreement that basically says wife gets a hundred $1,000.

00:47:38.000 --> 00:47:46.000

But But I, we're still fighting about other things when it comes to trying to finalize the divorce.

00:47:46.000 --> 00:47:52.000

And now I don't. I'm trying to think does our settlement agreement say includes losses and gains?

00:47:52.000 --> 00:47:58.000

I'm pretty sure it does. I'm pretty sure it does. Phew!

00:47:58.000 --> 00:48:13.000

Okay, so let's talk about, so we talked about how market fluctuations can address losses and gains and language you need to include in the quadro which basically if you want to account for those losses and gains you say include it.

00:48:13.000 --> 00:48:19.000

And if you know that, hey, we're gonna head into recession, let's exclude it.

00:48:19.000 --> 00:48:25.000

As you follow the markets and you're smart like that. Those are the language you want to include.

00:48:25.000 --> 00:48:26.000

Great.

00:48:26.000 --> 00:48:34.000

So let's talk about the retirement plan. Distribution and 20% with holding for taxes. Federal taxes.

00:48:34.000 --> 00:48:39.000

What's that about?

00:48:39.000 --> 00:48:40.000

Okay.

00:48:40.000 --> 00:48:45.000

So, how this came about is, so returning the plans. Are required to withhold at least 20%.

00:48:45.000 --> 00:48:52.000

From a distribution. From and let's talk about just to be clear I'm talking about fine contribution plants.

00:48:52.000 --> 00:48:53.000

Defined contribution plans, 4 1 k.

00:48:53.000 --> 00:49:01.000

Wait, wait, what kind of what? Okay. Okay, define contribution. Let's just say for okay, and then for example.

00:49:01.000 --> 00:49:02.000

Yeah.

00:49:02.000 --> 00:49:08.000

Yep. Right, so let's say you know you have a 4 k. And you received this money if you cash out that.

00:49:08.000 --> 00:49:09.000

Okay.

00:49:09.000 --> 00:49:23.000

That retirement plan administrator is required to withhold. 20% for taxes. And where that 2410 comes from is just over the years that's on average the ballpark marginal rate that people end up paying.

00:49:23.000 --> 00:49:27.000

Some people are higher, of course, some people are lower, but that's just where things have kind of settled.

00:49:27.000 --> 00:49:37.000

And so. Yeah, yeah, that's gonna be there. So if you're Okay. So if people are using.

00:49:37.000 --> 00:49:57.000

The retirement plan to say offset another asset. Then you want to be aware of this 20% tax impact because 20% I mean $50,000 in cash is not the same as $50,000 in retirement assets because the cash does not carry that 20% tax.

00:49:57.000 --> 00:49:58.000

With holy.

00:49:58.000 --> 00:50:10.000

Yeah. Okay. Yeah, cause when you're saying I get $50,000 a retirement access to maybe offset something else, if you take that 20%, you're absolutely getting like $40,000, right?

00:50:10.000 --> 00:50:12.000

That's right.

00:50:12.000 --> 00:50:19.000

So how do we? So we're just aware this is what you're trying to say.

00:50:19.000 --> 00:50:20.000

Okay, that's what happens. Yes.

00:50:20.000 --> 00:50:26.000

So, so that's what happens. There, there is a way to overcome this. And that is by doing what we call grossing up the award.

00:50:26.000 --> 00:50:27.000

Oh.

00:50:27.000 --> 00:50:31.000

In order to account for taxes and what you'll do is there's a simple little multiplier.

00:50:31.000 --> 00:50:32.000

Okay.

00:50:32.000 --> 00:50:41.000

You would multiply the award times 1 point. -Oh. Times 1.2 5. Can we pause for a second?

00:50:41.000 --> 00:50:47.000

Okay grossing up 1.2% Okay. Let's see.

00:50:52.000 --> 00:50:58.000

Okay, so to pick back off because I wanted to take a note here, okay, so you're talking about take 1.2 What do I do?

00:50:58.000 --> 00:50:59.000

1.2 5.

00:50:59.000 --> 00:51:06.000

Oh. Okay. Yeah, what am I doing now? I take 1.2 5% to gross up and

00:51:06.000 --> 00:51:20.000

And you multiply that by whatever the award amount is.

00:51:20.000 --> 00:51:21.000

Correct.

00:51:21.000 --> 00:51:28.000

Ever reward amount is. And I, and that's called, Okay, so let's okay, so what were the scenario?

00:51:28.000 --> 00:51:29.000

Yep.

00:51:29.000 --> 00:51:31.000

We're doing the 50,000, right? So we take 50,000. And then we multiply that by 1.2 5% equals what did you get?

00:51:31.000 --> 00:51:35.000

Correct. 62 5.

00:51:35.000 --> 00:51:53.000

So we're saying we're saying we so I'm saying on behalf of my client. So I want $62,500 from the retirement plan because even even though The time account has a hundred $1,000.

00:51:53.000 --> 00:52:06.000

If I say 50 50. Then my clients actually only get 40 because of the 20% retirement tax I have to say give her 62,500.

00:52:06.000 --> 00:52:07.000

Yes, and.

00:52:07.000 --> 00:52:13.000

Yes, and so if it's if it's a true 1550 Division. You don't need to gross up.

00:52:13.000 --> 00:52:14.000

Okay, because the ex spouse is gonna pay their taxes whenever they take the distribution and the participants gonna take.

00:52:14.000 --> 00:52:27.000

Is gonna pay their taxes when they take the district whenever they take the distribution and it's gonna be an apples to apples comparison.

00:52:27.000 --> 00:52:28.000

Okay. Okay.

00:52:28.000 --> 00:52:39.000

But you don't just need to do it just cause where the grossing up factor comes into play is when you're using the retirement plan assets to offset some other Pass it.

00:52:39.000 --> 00:52:41.000

Okay.

00:52:41.000 --> 00:52:42.000

That that one spouse is getting.

00:52:42.000 --> 00:52:50.000

So you're using the charm and plant asset to offset another asset. Okay, I, yeah, I get it.

00:52:50.000 --> 00:52:52.000

I get it.

00:52:52.000 --> 00:52:53.000

And the multiplier, trust me, I've done this math so many times. The multiplier is 1.2 5.

00:52:53.000 --> 00:52:58.000

Interesting. But. Okay. Yeah.

00:52:58.000 --> 00:53:04.000

Sometimes what people will do is it'll say, hey, you know, you're gonna have to pay 20% in taxes.

00:53:04.000 --> 00:53:13.000

So we're gonna gross it up by 20%. But if you do that, the alternate pay the ex spouse is still going to come up a little bit short.

00:53:13.000 --> 00:53:21.000

Okay. This the person receiving the money is still gonna come up short. Oh, okay. Okay, but.

00:53:21.000 --> 00:53:33.000

Is it isn't it? I thought there was something. Okay, not okay. I know this Alright, so again, I'm representing the woman in the divorce.

00:53:33.000 --> 00:53:42.000

And you know she's getting the retirement asset. Can't she? I thought there was a way where she could.

00:53:42.000 --> 00:53:51.000

Take out the money without having it be subject to that tax or we just talking about the transfer.

00:53:51.000 --> 00:53:52.000

Yes, thank you.

00:53:52.000 --> 00:54:04.000

Yeah, so let's unpack that a little bit. So. Under the internal revenue code. If you have, you have about 4 options, okay, when you're talking about a 4 1 k type asset transfer incident to divorce.

00:54:04.000 --> 00:54:11.000

So you can take a distribution. If you take that distribution, you would be subject to tax right away.

00:54:11.000 --> 00:54:12.000

The 20% tax, right?

00:54:12.000 --> 00:54:19.000

If you're the 20% tax, if you're under 59 and a half, there's also an typically.

00:54:19.000 --> 00:54:28.000

There's a 10% additional tax. However, The IRS is general is generous, excuse me.

00:54:28.000 --> 00:54:37.000

That when the transfer or the distribution is made pursuant to a domestic relation order, they waive that 10% tax.

00:54:37.000 --> 00:54:46.000

So, so option one, take a distribution. And your subject to taxes. Option 2. You can roll over.

00:54:46.000 --> 00:55:02.000

Those assets from the old retirement plan of your ex spouse to say a retirement plan. Option 3, instead of rolling it into a plan with your current employer, you can roll it into an IRA.

00:55:02.000 --> 00:55:04.000

Hmm

00:55:04.000 --> 00:55:18.000

And then option 4, depending on the terms of the plan, is you can always just leave. Well, not always, but you may be allowed to leave those assets in the current retirement plan.

00:55:18.000 --> 00:55:21.000

Hmm.

00:55:21.000 --> 00:55:22.000

Okay.

00:55:22.000 --> 00:55:29.000

So basically what happens is once the order is qualified. What to do what the planning administrator will do is they'll take this one account.

00:55:29.000 --> 00:55:30.000

Yeah.

00:55:30.000 --> 00:55:39.000

And to create a second account. And when they create that second account, the ex spouse step basically steps into the shoes of a planned participant and is treated as such.

00:55:39.000 --> 00:55:40.000

Okay.

00:55:40.000 --> 00:55:58.000

So they can technically in some cases leave the money in the plan, but in other cases they cannot because of a retirement plans might say, well, once we separate these accounts, you have to make a decision about what to do with the money within, you know, 60 days.

00:55:58.000 --> 00:56:06.000

And if you don't, then they just force you out and you automatically get a distribution which may have some text consequences for you in the future.

00:56:06.000 --> 00:56:13.000

So this is this is interesting. So I'm I'm under 59 and a half. And so let's just, bear with me.

00:56:13.000 --> 00:56:23.000

So let's just say the 1st scenario is right. I've got a hundred 1,000. Let's just say I've got a hundred $50,000 in my retirement account.

00:56:23.000 --> 00:56:28.000

And I'm like, I wanna take out a hundred $1,000 because I wanna put a down payment on something.

00:56:28.000 --> 00:56:34.000

I am going to get tax because I'm gonna get taxed 20%. Lots of 10%, cause I'm under 59 and a half, right?

00:56:34.000 --> 00:56:35.000

So 30%.

00:56:35.000 --> 00:56:38.000

If you're a general, yes, in general, that's correct. Yes.

00:56:38.000 --> 00:56:48.000

Okay, so that's 1. So let's, so that's 1 scenario. Then the next serial, same, you know, I.

00:56:48.000 --> 00:56:54.000

I'm getting a hundred $1,000 for my husband's retirement account. So I'm gonna roll it over.

00:56:54.000 --> 00:57:00.000

Oh, that's okay. So people who are listening, I'm actually doing a rolling sign with my fingertips.

00:57:00.000 --> 00:57:08.000

Alright, so I'm gonna roll it over into my own retirement account. So I can avoid the 10% tax.

00:57:08.000 --> 00:57:13.000

Right? Cause I rolled it over. But don't bear with me so I rolled it over. And then after, I took it out so I can use it for down payment.

00:57:13.000 --> 00:57:23.000

I'm getting taxed 20% or 30.

00:57:23.000 --> 00:57:27.000

Yeah.

00:57:27.000 --> 00:57:28.000

Okay.

00:57:28.000 --> 00:57:39.000

Okay, so there's so with the key here is we don't wanna get queue. Because while you can avoid that 10% excise tax when the transfer is done pursuant to That only applies to the 1st transaction.

00:57:39.000 --> 00:57:45.000

So if you, if you say, okay, I'm getting this amount of money out of my.

00:57:45.000 --> 00:57:56.000

Then I'm gonna roll it over into an IRA. That's your one transaction. So if you then after you roll it over into an IRA, you take out that money.

00:57:56.000 --> 00:58:04.000

You don't, you're still subject to that 10% excise tax. If you're under 59 and a half.

00:58:04.000 --> 00:58:20.000

Okay. So when I when I talk about too, wanna talk to my clients about doing the Pros and rolling it over so when they're rolling it from let's just say the husband's 4 1 k and the rolling into 4 1 k they create it.

00:58:20.000 --> 00:58:21.000

That's right.

00:58:21.000 --> 00:58:30.000

They're avoiding, they're avoiding that 10% on that 1st transfer. But if for some reason, once they put in their own for for one K account and let's say they wanted to take out a distribution to pay off deaths.

00:58:30.000 --> 00:58:38.000

Then they have to pay the 20% for that distribution plus the 10% of their under 59 and a half.

00:58:38.000 --> 00:58:39.000

That's right, unless there's some other exception that applies.

00:58:39.000 --> 00:58:41.000

Okay. What other exception could that be?

00:58:41.000 --> 00:58:54.000

And, and there is a list of exceptions. This is codified in section 72 T of the internal revenue code.

00:58:54.000 --> 00:58:55.000

It's actually t 2 c if you want to be precise.

00:58:55.000 --> 00:58:56.000

Wait, 72 T of the okay Okay. Okay, T, I'm not okay, got it.

00:58:56.000 --> 00:59:06.000

And these are the exceptions. Okay, do. Anyone that could apply? That do apply, maybe.

00:59:06.000 --> 00:59:07.000

In divorce. Yeah.

00:59:07.000 --> 00:59:16.000

Well, yeah. I don't know. Anything that I can get around for being a 10% tax.

00:59:16.000 --> 00:59:17.000

Work with me.

00:59:17.000 --> 00:59:24.000

There. Well, I mean, if you, you know, are of age where you would qualify for, you know, a substantially equal periodic payment.

00:59:24.000 --> 00:59:37.000

So you could receive, you know, a, an installment payment, for example. Or you know there's an exception for you know so much for a 1st time home purchase for example.

00:59:37.000 --> 00:59:38.000

Oh, okay.

00:59:38.000 --> 00:59:46.000

There's a whole slew of exceptions under this statue that would wave the the 10% excise tax quadro being one of them.

00:59:46.000 --> 00:59:57.000

Let me ask you this. 1st time the home purchase, 1st time home purchase. So let's say husband and wife, you know, during the marriage they purchase a home together.

00:59:57.000 --> 01:00:04.000

Now they get, now they're getting divorced, wife is getting in these monies from the husband and she's saying, okay, well with these.

01:00:04.000 --> 01:00:18.000

Monies from the 4 1 KI would like now to purchase my own home and I'm gonna do it as a single woman in my own name because she get that exception or be no, cause you purchased a home with your husband 20 years ago.

01:00:18.000 --> 01:00:26.000

If she becomes, if she is what's considered a qualified 1st time home buyer, then there would be an exception.

01:00:26.000 --> 01:00:27.000

Okay.

01:00:27.000 --> 01:00:32.000

If not, then she would be subject to that. That 10% early withdrawal penalty.

01:00:32.000 --> 01:00:39.000

Do you know what that is to be considered or qualified 1st time home buyer? And if you don't, that's fine.

01:00:39.000 --> 01:00:40.000

I'm going, we're off the weeds here. Yeah.

01:00:40.000 --> 01:00:49.000

We are off into the weeds here. I would need to do a quick. Little bit of research to get that clear definition.

01:00:49.000 --> 01:00:54.000

Just, just curious. Probably not, I would think.

01:00:54.000 --> 01:01:06.000

I was, I was just wondering, cause that'd be really interesting, right? Cause technically you're not a 1st time home purchaser, but if you purchase a home with a husband as a married couple, I would think.

01:01:06.000 --> 01:01:20.000

Actually, I don't know, but it would be nice, but maybe not. Cause it's a federal government so I would imagine They don't make things easy for exceptions.

01:01:20.000 --> 01:01:27.000

Maybe it's 1 of those things where it's like stay tuned. Stay tuned, come back for part 2.

01:01:27.000 --> 01:01:28.000

What has he answered?

01:01:28.000 --> 01:01:42.000

Yeah, it could be. So. So, so generally speaking, The 1st time qualified home buyer is someone who has not owned a home in the last 3 years.

01:01:42.000 --> 01:01:43.000

Okay.

01:01:43.000 --> 01:01:47.000

Wow. Thanks for looking that up really quickly. Awesome.

01:01:47.000 --> 01:01:51.000

I'm just trying to think. I'm just trying to think. Is there.

01:01:51.000 --> 01:02:01.000

Hmm. I'm sorry I think if there's maybe not I guess there's just no way in terms of that I would, it would be nice.

01:02:01.000 --> 01:02:11.000

Cause I'm just thinking of, especially like with women and I'm just kinda thinking I'm putting myself in the place of the woman who has traditionally been the stay at home mother.

01:02:11.000 --> 01:02:19.000

And so they're really kind of coming out of the marriage without without much in terms of the monies and the monies are getting is essentially the the community portion.

01:02:19.000 --> 01:02:26.000

Of what the husband had earned and you know the husband is a 1 that's contributing to the retirement earning, the retirement and such.

01:02:26.000 --> 01:02:40.000

And so it helps a woman. When we use people to do the qualified domestic relations order because in a way we're helping the woman to Get that, started in her own retirement account.

01:02:40.000 --> 01:02:58.000

But it would be nice. Knowing that if the woman need to take the money out from their retirement account to maybe do a purchase on a home that she could do so without paying the 20% or without paying the 10% that it sounds like, no, there's no exceptions for that, which makes me think there should be.

01:02:58.000 --> 01:03:07.000

Like I said, there's, there's a lot of exception. For the, for the home purchase, you can certainly do that if you're the qualified home, 1st time phone.

01:03:07.000 --> 01:03:08.000

Hmm. Yeah.

01:03:08.000 --> 01:03:23.000

You know, another exception could be for the birth of or adoption of a child. Another exception could be, you know, your domestic abuse victim, you can take out a portion of that.

01:03:23.000 --> 01:03:29.000

Retirement plan asset without having to pay the early withdrawal penalty.

01:03:29.000 --> 01:03:30.000

That's the 10%. That's the 10%.

01:03:30.000 --> 01:03:40.000

And when you say the early withdrawal penalty, are you talking about the 10% or the 20? 0, the 10% if you're a domestic abuse victim and of course there's gonna be this is what it means for you to be a domestic abuse victim.

01:03:40.000 --> 01:03:51.000

Which I'm gonna look up because I'm gonna be mad. If there's things like your spouse has to have then convicted or did you get a restraining or protection order?

01:03:51.000 --> 01:03:56.000

I'm gonna look it up. Cause that's gonna be interesting. Okay, so. What?

01:03:56.000 --> 01:03:58.000

Homework. Homework.

01:03:58.000 --> 01:04:21.000

Homework, homework. I was just kind of why why would someone want to going back to the initial thing right where you know we're getting to divorce I'm taking my husband's retirement account I'm rolling it over into my own retirement account so I don't have to pay that 10% because I'm under the age of 59.

01:04:21.000 --> 01:04:28.000

Why would I want to take my the 4 1 k monies and put into an IRA instead of another for one K?

01:04:28.000 --> 01:04:35.000

Is there any benefit to that? Or is it just if you like iOS?

01:04:35.000 --> 01:04:36.000

Yeah, rolling over.

01:04:36.000 --> 01:04:42.000

So putting that into an IRL versus putting it into a, Well, I mean, some people don't have access to it for one K, right?

01:04:42.000 --> 01:04:43.000

Yes.

01:04:43.000 --> 01:04:54.000

Cause it's employer sponsored. So some people don't have access to it. Some people don't like the investment lineup that they have available to them in their 400, and onek.

01:04:54.000 --> 01:05:05.000

So maybe you want to put it in IRA so you have access to a wider pool of investments that are more congruent with your with your strategy and objectives.

01:05:05.000 --> 01:05:13.000

Good point. Good point. Cause if you're staying home, Mom, you're not going to have a.

01:05:13.000 --> 01:05:20.000

So you're gonna have to do an IRA. Oh, okay. That makes sense. That makes sense in terms of.

01:05:20.000 --> 01:05:27.000

I was just thinking of the D forks I had a financial planner. And a lot of it is Iris.

01:05:27.000 --> 01:05:32.000

Well, he has some for one case. It's his own business, but. We're doing the transfers between husband and wife.

01:05:32.000 --> 01:05:36.000

Interesting.

01:05:36.000 --> 01:05:37.000

Okay.

01:05:37.000 --> 01:05:48.000

And that's a great segue just as a side note. When it comes down to dividing an IRA, for those who don't know, qualified domestic relation order is not required.

01:05:48.000 --> 01:05:51.000

To transfer IRA assets.

01:05:51.000 --> 01:06:08.000

Yeah. And I had to tell. An attorney that when they were like oh let's do the are we gonna get a quadra attorney I'm like no we're doing an IRS so they don't need a qualified domestic relations order for that you just do the transfer.

01:06:08.000 --> 01:06:09.000

And go ahead.

01:06:09.000 --> 01:06:10.000

Yeah, so the pain on the custodian, generally what you're gonna need is to complete the transfer form.

01:06:10.000 --> 01:06:28.000

They might want to see a copy of the final divorce decree. And then sometimes they might need to see a leather of instruction that directs them exactly where it to move the money and how to move the money and that type of thing.

01:06:28.000 --> 01:06:38.000

So it's some combination of those 3 documents for most custodians is what's necessary to do a transfer incident to divorce for a for an IRA.

01:06:38.000 --> 01:06:44.000

But what's good about that is in terms of the, you don't need to have your divorce lawyer take care of that.

01:06:44.000 --> 01:06:50.000

You don't need to have a quadrant attorney. You can you the person can take care of that yourself.

01:06:50.000 --> 01:06:51.000

That's right. You do save money.

01:06:51.000 --> 01:06:56.000

So you say, I mean, stuff. That's nice that way. So is this a good time?

01:06:56.000 --> 01:07:06.000

I'm almost kind of thinking my head to talk about What what trip people up between distinguishing between IRAs.

01:07:06.000 --> 01:07:10.000

The defined benefit and the defined contribution plans. Do we talk about that? Okay.

01:07:10.000 --> 01:07:23.000

Yeah, we have not talked about that. So we kind of, so we've kind of talked about, you know, these type account types on their own, right?

01:07:23.000 --> 01:07:24.000

Okay.

01:07:24.000 --> 01:07:34.000

But what, what we haven't talked about is distinguishing between the 2. Between the 3. And the thing that frequently trips people up is using the wrong account, language for the wrong account type.

01:07:34.000 --> 01:07:35.000

Yeah.

01:07:35.000 --> 01:07:45.000

So let me give you an example. So let's say we're dividing a. Sometimes you'll see in the judgment or even in the draw language that's geared towards a pension.

01:07:45.000 --> 01:07:52.000

And it's often times not applicable or vice versa, you could see that. So it's really critical.

01:07:52.000 --> 01:08:06.000

Even before we get to the quadras point, but when you're, you know, mediating or collaborating or, you know, negotiating a settlement, it's really important to understand what type of retirement plan you're working with.

01:08:06.000 --> 01:08:14.000

And not only that. Is it a type of retirement plan that can be divided? By Quadro.

01:08:14.000 --> 01:08:16.000

Cause not all planes can't.

01:08:16.000 --> 01:08:34.000

And you know, if you draft up this beautiful judgment language and incorporate it into your divorce decree and you're like, yes, I'm gonna go send them to Marcus because he can do this quadro and I come back and say actually this is a non-qualified deferred compensation plan and this cannot be divided by quadru.

01:08:34.000 --> 01:08:35.000

So how do you want to handle this? Are you gonna go back then? Are you gonna go back to court and I'm in the judgment?

01:08:35.000 --> 01:08:48.000

Are you gonna renegotiate? And it can just open a big can of worm. So knowing the type of plan.

01:08:48.000 --> 01:08:49.000

Okay.

01:08:49.000 --> 01:08:55.000

Whether or not it can be divided or not and knowing those plans features is is critical.

01:08:55.000 --> 01:09:06.000

Okay. So what is, so let's talk about like what's the difference between an IR, the, you find benefit and defined contribution plan.

01:09:06.000 --> 01:09:13.000

Yeah, so I mean, and I is. So IRA stands for individual retirement account. The operative word here being individual.

01:09:13.000 --> 01:09:25.000

So with an IRA, the individual sets up an account. That allows them to put money into it to save for retirement.

01:09:25.000 --> 01:09:41.000

Whereas with your it's kind of it's a it's a defined contribution plan in the sense that The ultimate benefit that you receive in retirement is dependent upon how much you contribute and how well the market does.

01:09:41.000 --> 01:09:49.000

But one thing like I always I try to bring up when distinguish between the is that it's after tax money.

01:09:49.000 --> 01:09:56.000

So it's okay. Danny. Oh, okay. Okay.

01:09:56.000 --> 01:09:57.000

Let's go. Okay.

01:09:57.000 --> 01:10:02.000

Well, it depends. It's depends on the type of IRA. So, so for the individual, generally speaking, we're talking about a traditional IRA.

01:10:02.000 --> 01:10:03.000

Or a rough IRA.

01:10:03.000 --> 01:10:07.000

Okay. Traditional or Roth IRA. Okay.

01:10:07.000 --> 01:10:16.000

And with the traditional IR, you contribute money to it. And you receive a tax deduction provided that you're that you're within the income thresholds.

01:10:16.000 --> 01:10:23.000

Okay.

01:10:23.000 --> 01:10:24.000

Pass the 3rd

01:10:24.000 --> 01:10:31.000

If it's a and as that money grows. It grows tax deferred. And you're not taxed, you don't receive any taxes until you actually take start taking the money out.

01:10:31.000 --> 01:10:35.000

Okay, and so when you start taking the money out, then your tax at 20%. Or Okay.

01:10:35.000 --> 01:10:44.000

Or, yeah, yeah. So yes, yes, it depends on your individual financial situation, but yes.

01:10:44.000 --> 01:10:45.000

Okay.

01:10:45.000 --> 01:10:49.000

Right. Okay, so that's the traditional Roth RA. So the traditional author, A is almost like a 4 1 k where you're deferring.

01:10:49.000 --> 01:10:58.000

You're deferring taxable income. And then you pay the tax coming out. So the non, what's the IRA call that you're basically putting after tax money is into it?

01:10:58.000 --> 01:11:01.000

So when you're retired, you don't have to pay the taxes.

01:11:01.000 --> 01:11:05.000

Right, so that's a rough IRA.

01:11:05.000 --> 01:11:06.000

I thought you said the other one was a traditional rock.

01:11:06.000 --> 01:11:13.000

No, the other ones are traditional IRA. And the non-tax one is a rough IRA.

01:11:13.000 --> 01:11:15.000

Okay, so the traditional IRA operates like a 4 1 k. Taxed for money going in, paid taxes going out.

01:11:15.000 --> 01:11:29.000

The Roth IRA, you've paid taxes at the you're putting in money that you pay taxes on when you take it off the end.

01:11:29.000 --> 01:11:35.000

You're not paying taxes. That's right.

01:11:35.000 --> 01:11:38.000

Okay.

01:11:38.000 --> 01:11:39.000

What?

01:11:39.000 --> 01:11:46.000

Yes. More than 5 years. You have you have to you have to be over 59 and a half.

01:11:46.000 --> 01:11:47.000

But it's not so

01:11:47.000 --> 01:11:49.000

Oh, to get out the money tax free. Okay.

01:11:49.000 --> 01:11:54.000

Right, and it's not just the principle, it's the principal plus earnings. So that's what makes us so powerful.

01:11:54.000 --> 01:12:04.000

So if you start the Roth IRA when you're, you know, a young person, let's say you're 25 and you know you just established your career and you start a Roth IRA.

01:12:04.000 --> 01:12:10.000

By the time you take that money out when you're 65 70 Think about how much it's grown.

01:12:10.000 --> 01:12:11.000

I'm gonna have much.

01:12:11.000 --> 01:12:17.000

And you're no longer subject to You don't have to pay taxes on those earnings because you have

01:12:17.000 --> 01:12:24.000

Oh my. I have a kid that's graduating from high school is going to start college. He's going to do a Roth already.

01:12:24.000 --> 01:12:25.000

I did not know.

01:12:25.000 --> 01:12:26.000

Do it now as soon as they start earning money, do it.

01:12:26.000 --> 01:12:33.000

Oh my gosh, Marcus, thank you. Thank you, thank you. Oh my gosh. Right there, take away.

01:12:33.000 --> 01:12:39.000

Is it too late for me to start a Roth? I, as an early 50 ish persons.

01:12:39.000 --> 01:12:40.000

Okay.

01:12:40.000 --> 01:12:49.000

No, no, no, of course not. You can absolutely start a rough IRA. Just with traditional and rough IRA, just keep in mind there are income limits.

01:12:49.000 --> 01:12:50.000

Hmm.

01:12:50.000 --> 01:12:59.000

So if you make more than a certain amount of money then you would be ineligible. To contribute or you can just make a non deductible contribution.

01:12:59.000 --> 01:13:02.000

What the hell does that mean?

01:13:02.000 --> 01:13:11.000

So a non deductible contribution to a traditional IRA, right? So let's say, what is the contribution limit this year is $7,000.

01:13:11.000 --> 01:13:14.000

I forget. Okay, so 7,000. For Iris.

01:13:14.000 --> 01:13:29.000

So it's $7,000. So if you're for Iris, yep. So let's say you have you're within the income range and you, you can contribute up to $7,000 and that would be tax deductible.

01:13:29.000 --> 01:13:39.000

Now, if you're outside of the income range. Then you can still make that $7,000 contribution.

01:13:39.000 --> 01:13:41.000

But you don't receive the tax deduction.

01:13:41.000 --> 01:13:45.000

Does that mean I get tax on the money at the end? When I pull it out, is that what you're saying?

01:13:45.000 --> 01:13:48.000

You can pull out your principle.

01:13:48.000 --> 01:13:53.000

Okay. Now, are we talking about the Roth or the traditional?

01:13:53.000 --> 01:14:10.000

What's on the traditional, cause you have me about the non deductible. So we don't have to worry about deductions on the rock because you're paying that with post that you're contributing to that with post tax dollars.

01:14:10.000 --> 01:14:17.000

Roth is like the. The Roth is I'm putting taxes in. So I forgot we're talking about the non-deductible on the traditional.

01:14:17.000 --> 01:14:18.000

Correct.

01:14:18.000 --> 01:14:28.000

Okay, and now you'd have to go see that again. Oh good lord!

01:14:28.000 --> 01:14:29.000

There's a lot.

01:14:29.000 --> 01:14:36.000

There's a lot, yeah, I guess I'm gonna have to just go, I'm gonna go back and have to re listen to this podcast again.

01:14:36.000 --> 01:14:41.000

And edit it.

01:14:41.000 --> 01:14:42.000

Yeah.

01:14:42.000 --> 01:14:47.000

Cause if I know to put this part on a loop. Lord. So no, but I wanna make sure I understand this.

01:14:47.000 --> 01:14:56.000

So we do have a traditional, again, like a 400, and onek, $7,000 is if I'm outside the income limits.

01:14:56.000 --> 01:15:01.000

What does that mean in terms of the non deductible again?

01:15:01.000 --> 01:15:08.000

So if you are outside of the income limits. You can contribute. The full amount, which is $7,000.

01:15:08.000 --> 01:15:15.000

And if you're over 50, you can get an additional catch up contribution. But you just don't receive.

01:15:15.000 --> 01:15:22.000

A tax deduction.

01:15:22.000 --> 01:15:30.000

So if I don't receive like, can, can you do, if I don't receive the to tax deduction, that means I don't receive the tax deduction, putting the money in or

01:15:30.000 --> 01:15:32.000

Putting the money in.

01:15:32.000 --> 01:15:37.000

Oh, putting the money in so I'm gonna get taxed on that money.

01:15:37.000 --> 01:15:39.000

You would get tax on the earnings attributable to that money.

01:15:39.000 --> 01:15:46.000

Oh. And when do I pick? Okay, I get tax on, okay, I get tax on the earnings.

01:15:46.000 --> 01:15:47.000

Wow, and this is

01:15:47.000 --> 01:15:52.000

This, this leads to this can go down the rabbit hall of a more nuanced financial planning conversation.

01:15:52.000 --> 01:16:02.000

And I don't know if you want to get into all of that. Okay.

01:16:02.000 --> 01:16:03.000

Okay.

01:16:03.000 --> 01:16:08.000

Good morning. Yeah, no, I don't wanna get, No, no, Okay, I already took a sound a rabbit home I'm afraid, but just but it just kind of it just it's sucks in the way because with the, you've got that.

01:16:08.000 --> 01:16:13.000

You've got that $7,000 with the 4 1 KI forgot what it is.

01:16:13.000 --> 01:16:19.000

I think the 4 1 k is you can what is it do you remember at the top of your head was

01:16:19.000 --> 01:16:23.000

It's 23,000.

01:16:23.000 --> 01:16:24.000

Right.

01:16:24.000 --> 01:16:25.000

Oh my gosh, I was gonna say 30, maybe because I'm thinking of the catch up. Yeah, so but I get it.

01:16:25.000 --> 01:16:42.000

It just terms if like if you're an older person and you would wanna use. The the 4 1 k.

01:16:42.000 --> 01:16:43.000

That's right.

01:16:43.000 --> 01:16:46.000

With an IRA to maximize. The monies that you can put away for retirement. And that's when it's just you need to work in financial planner to figure it out.

01:16:46.000 --> 01:16:48.000

That's right. That's right.

01:16:48.000 --> 01:16:57.000

Wow, we went down the financial planning world. Sorry folks. Okay, okay, so do we talk about this, the impact?

01:16:57.000 --> 01:17:03.000

I think we talked about this, the impact the alone can play. When doing the distribution planning.

01:17:03.000 --> 01:17:20.000

Yeah, we did touch on that, but we could talk about a little bit more. So. So we talked about how the, how the plan administrator will.

01:17:20.000 --> 01:17:21.000

Oh. Yeah.

01:17:21.000 --> 01:17:29.000

Value the account, whether or not there's a loan or not. Right? One thing to keep in mind, this is This is more accounting because at the end of the day The plan participant is always responsible for repaying the loan because it's theirs.

01:17:29.000 --> 01:17:46.000

If the loan came from their account, there responsible for repaying it. Now from an accounting perspective and the distribution perspective, what we're trying to do is say, okay, how much of this loan will be attributable to each of the parties.

01:17:46.000 --> 01:17:47.000

Okay.

01:17:47.000 --> 01:17:56.000

So in in our previous example, right? $100,000 balance, $20,000 loan. $80,000 net.

01:17:56.000 --> 01:18:05.000

Well, if we include the loan. Basically what we're saying is that plan participant, 100% responsible for paying back the loan.

01:18:05.000 --> 01:18:15.000

As a practical matter and as a matter of accounting. If we exclude the loan. And each party is only getting that 40 K.

01:18:15.000 --> 01:18:22.000

Instead of the 50 K. Basically what we're saying is each of you. Are paying back $10,000 of the loan.

01:18:22.000 --> 01:18:26.000

Into the account and that's why you're only getting 40 K.

01:18:26.000 --> 01:18:32.000

Okay. Yeah, definitely case by case type of scenario in terms of that.

01:18:32.000 --> 01:18:40.000

Definitely. Definitely. And it's just important to identify. Hey, are there any loans on this account?

01:18:40.000 --> 01:18:41.000

Right.

01:18:41.000 --> 01:18:45.000

How does the plan handle loans? Loans are kind of counterintuitive. When are you adding the loan?

01:18:45.000 --> 01:18:52.000

When are you subtracting the loan? It doesn't. Make the most sense right off the top of your head.

01:18:52.000 --> 01:19:02.000

You have to kind of think about it a little bit. So it's important to get this language right because it can have some pretty drastic effects on the ultimate award.

01:19:02.000 --> 01:19:10.000

Well, and you know, that's gonna save me, Me us and to into like, I guess last question for you.

01:19:10.000 --> 01:19:28.000

Is like I was thinking of. What are your tips for the family law practitioner and what are your tips for the layperson off the top of my bat at the top of my head off the bat I'm thinking Get the quadrille attorney involved as part of the settlement negotiations.

01:19:28.000 --> 01:19:36.000

Because I feel like by the time I met mediation I got the settlement agreement. Then a way that's too late.

01:19:36.000 --> 01:19:40.000

Get you involved earlier and say, hey, this is what I'm looking at. What should we do?

01:19:40.000 --> 01:19:46.000

Would that be a good tip or do you have something else?

01:19:46.000 --> 01:19:47.000

Okay.

01:19:47.000 --> 01:19:59.000

Absolutely. That's my number one tip. If you know that you are going to be retire dividing retirement plan assets get somebody who's focuses on this area involved as early as possible.

01:19:59.000 --> 01:20:00.000

Hmm.

01:20:00.000 --> 01:20:09.000

Not just to help you understand the plan and avoid some of those drafting errors or potential headaches but like we mentioned with the you know, 26 year old case to make sure that it gets done.

01:20:09.000 --> 01:20:10.000

Yeah.

01:20:10.000 --> 01:20:23.000

A big a big area of malpractice for attorneys when it does come to quadros is you know it was specified that you know respondents was to draft the Quadro respondents attorney never drafted the quadro.

01:20:23.000 --> 01:20:24.000

Oh yeah.

01:20:24.000 --> 01:20:27.000

And now we have a Clagmire on their hands. So getting somebody involved early. Making sure it gets done.

01:20:27.000 --> 01:20:32.000

By far, tip number one. Tip number 2. Understand the plan. Understand the plan.

01:20:32.000 --> 01:20:42.000

Is this a, is this a, Is this a pension? What are the unique features of this plan?

01:20:42.000 --> 01:20:57.000

Each plan has different. Is constructed differently. So, 4 1 k for. The Acme company is different than 4 1 k from the coyote company.

01:20:57.000 --> 01:21:01.000

Love votes, Bunny. Thanks for shout out. What?

01:21:01.000 --> 01:21:11.000

Yeah. Okay. And this is especially, important. When it comes to pension plans.

01:21:11.000 --> 01:21:12.000

Okay, yeah.

01:21:12.000 --> 01:21:16.000

So with 4 1 k's, you know, we're kind of aware of those, right?

01:21:16.000 --> 01:21:26.000

They're in the forefront. We're, you know, we look at our pay stub and money's coming out and it's going into our 400 onek because we're responsible for making that those contributions.

01:21:26.000 --> 01:21:34.000

With the pension plan, the employer is responsible for making those contributions and maintaining the health of that pension plan.

01:21:34.000 --> 01:21:35.000

Right.

01:21:35.000 --> 01:21:45.000

So you may not get. You know, a pace, you're not gonna get a paste of every couple of weeks or every month or whatever showing the amount being withdrawal going into your pension.

01:21:45.000 --> 01:21:52.000

You might only get in the cruel statement once a year. And you might completely disregard it because you're like I'm not retiring for 40 years.

01:21:52.000 --> 01:22:00.000

What do I need to look at this thing for? Right? And totally forget that you have this plan.

01:22:00.000 --> 01:22:01.000

Okay.

01:22:01.000 --> 01:22:14.000

Okay, another element of this is Because a lot of the remaining pension plans are for union type employees. Well, they might have a local Union pension plan but they might also have a national pension plan.

01:22:14.000 --> 01:22:18.000

Oh yeah.

01:22:18.000 --> 01:22:19.000

Yeah.

01:22:19.000 --> 01:22:30.000

Did you address both? One or the other or none at all? So making sure you know. All of the information about the respective plans that are potentially being divided.

01:22:30.000 --> 01:22:36.000

Is very, very important. And you know the tips for the layperson are very similar, you know.

01:22:36.000 --> 01:22:37.000

Hmm.

01:22:37.000 --> 01:22:48.000

These are not documents. To be taken lightly. There's a lot of moving parts of you as you discover then our conversation today and we could talk for another 2 h about all of the movie parts.

01:22:48.000 --> 01:22:50.000

We could. We could.

01:22:50.000 --> 01:22:58.000

There are different plan types. And and and this is people's largest asset

01:22:58.000 --> 01:22:59.000

It is.

01:22:59.000 --> 01:23:04.000

So, so give it the care that it deserves.

01:23:04.000 --> 01:23:11.000

We have a I did a divorce case and it was kind of the scenario you're talking about in terms of he was part of a union.

01:23:11.000 --> 01:23:36.000

So there's a state state plan and then a national plan and then we had the 4 1 k so yeah we were talking about 3 quadrants that needed to be drafted and I was the one representing the wife so I was at it was very important for her to make sure that she got These monies and it's huge and for the for the attorneys out there it's almost as if like and that's why I you know don't do

01:23:36.000 --> 01:23:46.000

these quadrils because it's a malpractice issue. You're not doing it correctly that's why it's just it's a nightmare don't do it.

01:23:46.000 --> 01:23:52.000

Oh my gosh, Marcus, thank you so much for your

01:23:52.000 --> 01:23:53.000

Yes.

01:23:53.000 --> 01:23:57.000

Absolutely. And, I would just say one last thing. That is a under utilize.

01:23:57.000 --> 01:24:01.000

Way to, utilize quadrant. It's just, it's, very important.

01:24:01.000 --> 01:24:11.000

So under the statute. You can utilize a quadro. For purposes of marital property division, which is predominantly what we've been talking about today.

01:24:11.000 --> 01:24:12.000

Yeah.

01:24:12.000 --> 01:24:17.000

But you can also use it. For alimony and child support.

01:24:17.000 --> 01:24:19.000

What? See what?

01:24:19.000 --> 01:24:29.000

That's right. It can be used. You can use the quadro for alimony and child support.

01:24:29.000 --> 01:24:30.000

Yeah.

01:24:30.000 --> 01:24:44.000

So let's say let's just call it husband. Let's say husband has, you know, you did the property.

01:24:44.000 --> 01:24:45.000

Yeah.

01:24:45.000 --> 01:24:47.000

Ex wife is supposed to get so much and child support for the benefit of the children. Ex husband doesn't pay it, now there's this Okay, well, you can go back.

01:24:47.000 --> 01:24:54.000

And have another quadro drafted in order. To pay that a rearrange.

01:24:54.000 --> 01:25:01.000

Wait a minute, wait a minute. Okay, but

01:25:01.000 --> 01:25:09.000

Can I as a wife just do it on my own? Or don't I have to get some side of court order that says I could do this?

01:25:09.000 --> 01:25:10.000

Oh.

01:25:10.000 --> 01:25:16.000

Well, you already have a, right? You already have that divorce decree that says, This is how much child support you're supposed to pay.

01:25:16.000 --> 01:25:25.000

So if you provide the documentation showing oh you do you have not paid this amount There is an outstanding balance.

01:25:25.000 --> 01:25:34.000

A quadro can be utilized to attach to retirement plan assets to pay that outstanding balance. And there is no limit.

01:25:34.000 --> 01:25:49.000

On how many quadros can be submitted. On a particular 4, 0 1 k for example, provided that You are not awarding benefits that are awarded to another ex spouse.

01:25:49.000 --> 01:26:01.000

Hmm. I see. But I think it's 1 of those 2. It's 1 of those things where if you have, you know, let's 1st of all you have to make assume that there's money in the in the show of money that retirement account to pay for.

01:26:01.000 --> 01:26:02.000

Right, right.

01:26:02.000 --> 01:26:09.000

And I could just see You know, my husband's not paying child supporters.

01:26:09.000 --> 01:26:10.000

It could be because in a way he is, he's willfully, let's just, he's wfully not doing that.

01:26:10.000 --> 01:26:22.000

So once he sees that quadru coming through and taking out those money, he's probably then gonna transfer into another retirement account that the wave can't touch.

01:26:22.000 --> 01:26:23.000

Doesn't know about, right? Okay.

01:26:23.000 --> 01:26:32.000

Potentially potentially potentially potentially potentially potentially potentially potentially, potentially, however, The way around this is When we're talking about 4 0 1 case.

01:26:32.000 --> 01:26:45.000

Once the plan administrator is on notice. That there is a potential quadropending. They will freeze the participants account so they cannot take out any loans.

01:26:45.000 --> 01:26:48.000

They cannot make any distributions.

01:26:48.000 --> 01:26:54.000

And that freeze can remain on the account for up to 18 months.

01:26:54.000 --> 01:27:05.000

Wow, that is that is interesting. I did not know that you could use Quadras for that.

01:27:05.000 --> 01:27:06.000

Okay.

01:27:06.000 --> 01:27:10.000

So Holy moly, mind-blowing. Thank you so much, Marcus. Yeah, Marius just did the explosion.

01:27:10.000 --> 01:27:11.000

Okay.

01:27:11.000 --> 01:27:18.000

But before we leave, what's a fun fact about yourself that people would not know just from looking at you?

01:27:18.000 --> 01:27:27.000

Wine is my love is one of my love languages, especially a red blend. Okay, it really gets me going.

01:27:27.000 --> 01:27:30.000

That's your love language.

01:27:30.000 --> 01:27:41.000

I mean, quality time and physical touch are up there too, but I mean, you give me a good a good glass of GSM, then it's its ballgame.

01:27:41.000 --> 01:27:42.000

There's like putting in a person's hand.

01:27:42.000 --> 01:27:45.000

Right, that's right.

01:27:45.000 --> 01:27:58.000

Oh my gosh, love it. Well, thank you so much, Marcus, for coming on and kind of demystifying the exciting world of And Marcus.

01:27:58.000 --> 01:28:05.000

Yeah, it's my pleasure and I'm sure after listening to this some people want to go get a route can now rather than dealing with the quadrant but that's okay.

01:28:05.000 --> 01:28:06.000

Yeah, I know they're like, good lord. She rabbit on weights long. Cut that shit out.

01:28:06.000 --> 01:28:09.000

That's why we're here to have. Yeah.

01:28:09.000 --> 01:28:14.000

Sorry folks, how can people get a hold of you to hire you and if they got more questions?

01:28:14.000 --> 01:28:20.000

So, as we mentioned at the top, I'm with Pacific Northwest Quadro.

01:28:20.000 --> 01:28:30.000

We serve Oregon, Idaho in Washington. It can be reached online our website is p and w Quadro.

01:28:30.000 --> 01:28:31.000

Dot com.

01:28:31.000 --> 01:28:42.000

Okay, awesome. And of course, after when this, you know, go ahead and look to our podcast where we'll have a link to get in touch with Marcus.

01:28:42.000 --> 01:29:01.000

As well. Thank you again, Marcus, for sharing your knowledge and insight and just amazing and you know folks Marcus is not only smart but he's just a good down to earth and and funny guy and at the cliber professionals of Washington.

01:29:01.000 --> 01:29:02.000

Thank you.

01:29:02.000 --> 01:29:07.000

He was just cracking me up. So I just, I just love it that you can make a topic like this.

01:29:07.000 --> 01:29:12.000

That just makes me wanna pull up my hair. Understandable and dare I say sexy. Okay.

01:29:12.000 --> 01:29:17.000

Yeah, that's a good for other word to describe a quadro. I like it.

01:29:17.000 --> 01:29:26.000

Yeah, yeah. And thank you again for all the listeners out there for listening to another episode of the Aquan of Law podcast.

01:29:26.000 --> 01:29:47.000

We're in, we talk about anything that talks intersects with the errors of family law and divorce and go ahead and You know, hit that like and subscribe button until then.

01:29:47.000 --> 01:29:48.000

Nope.

01:29:48.000 --> 01:29:51.000

Be well. Okay, and that's it. Thank you so much, Marcus.

01:29:51.000 --> 01:29:52.000

Thank you.

01:29:52.000 --> 01:29:56.000

That was fun. That was fun. I don't know how long we talk, but we did talk a lot longer than I thought.

01:29:56.000 --> 01:29:57.000

That's okay.

01:29:57.000 --> 01:29:59.000

But yeah, no, this is really good, really informative. So.

01:29:59.000 --> 01:30:04.000

It's easy to get down those rabbit holes.

01:30:04.000 --> 01:30:05.000

There's just so much.

01:30:05.000 --> 01:30:10.000

Yeah, yeah, but. There is, but I'm gonna have a Dana and Ashley listen to it and they can be like, well, maybe we'll cut off this part or something.

01:30:10.000 --> 01:30:13.000

Yeah, sure, sure, sure.

01:30:13.000 --> 01:30:17.000

Anyway, it was good. It was thank you again for doing this and, well, letting you know when it's up and live and I've got to head out to another meeting.

01:30:17.000 --> 01:30:25.000

YeahSo