Agreeing to a divorce settlement can be overwhelming, especially when you read through the legal jargon incorporated in your decree. There is some standard language you may see that clients commonly have questions about. One of the most asked questions has to do with the phrase “plus or minus gains and losses.”
It is very common for settlements to specify how an account will be divided, leaving no room for interpretation. For example, you may see something like “Defendant will divide their 401k account 50/50. The account will be valued as of December 31, 2020, plus or minus gains and losses.” This means the money in the account is invested and therefore will likely change in value from the day the agreement is reached to the day the account is actually divided. If the account goes up in value, then the gains should be divided, also. But if the account loses money in that time, both parties will participate in the loss, as well.
The concept sounds simple, but it can become a bit of a sticking point. Accounts are typically valued based on an agreed-upon separation date. This may be the date that one spouse moved out, when someone filed for divorce, or even the day the decree is finalized. If your separation date is the date your spouse moved out and your divorce isn’t finalized for 12-18 months later, that can make for some substantial changes in account values. Therefore, it is important to know the value of the assets as of the separation date, but sometimes it is important to know the current value of the accounts if you are in the middle of negotiating. If all accounts will be split 50/50, then there is not much to discuss. But what if one spouse wants to keep their pension and the other wants to keep the investment accounts? In this case, we could argue that the present value of the investment accounts is important to gauge gains and losses on the marital money from the separation date to present. This could make a drastic difference in the fairness of the settlement.
If you have questions about the details of your case, give us a call. We will help you feel confident about the details surrounding your finances and make sure you have the right expectations about how much you will be receiving in your settlement.