How To Accidentally Lose Half Your Retirement in a Divorce

Retirement benefits are usually one of the most valuable assets in a divorce case. You’ve been putting money into it for decades after all. So, when you write the language in the decree to divide your retirement benefits you better be extra careful. If you’re not careful, then you can make a costly divorce retirement mistake. And that mistake may be you giving away a lot more of your retirement than you expected to. Let’s take a look at a recent case (not one of mine) where that is exactly what happened.

You know how this story starts. A husband and wife filed for divorce. They eventually put together a divorce decree after lengthy negotiations. The judge signed the decree and finalized the divorce. They go their separate ways not realizing the ticking time bomb they left in the decree.

19 Years Later They Have a Problem

19 years after they closed the case the problems start. The wife, Linda, thought she obtained 50% of her husband’s retirement benefits. She thought this included the benefits he earned even after they divorced. The husband, Marcel, thought that he was only giving her 50% of his retirement benefits that he earned during the marriage. That is the community property portion only and none of the separate property.

The Offending Language

The language they used in the divorce decree was:

“[o]ne-half of Respondent’s [Marcel’s] Profit Sharing Plan at the time of retirement or after having left the employment of Dixie Iron Works.”

So what did the court do with Marcel’s profit sharing plan?

Linda’s attorney argued that the language is clear and subject to one interpretation. That interpretation being Linda gets 50% of the total benefit when he retires or leaves his job.

Marcel’s divorce lawyer argued that the language was ambiguous. If it was ambiguous, then the court could consider the intent of the parties. If it was not ambiguous, then the court has to carry out its literal terms. He claimed that leaving out the word “total” makes the provision unclear.

The judge decided the language was clear. Since the language was clear, it is not subject to interpretation. Therefore, the court gave Linda 50% of her husband’s TOTAL retirement benefit. This included the community property and separate property. That’s a pretty big divorce retirement mistake for Marcel.

It’s Not The Language, It’s the Expectations

When Linda and Marcel both looked at their decree they saw the same language. However, they read it two completely different ways. They both read that same provision as giving them what they wanted. This is a common mistake in many do it yourself uncontested divorce cases in The Woodlands. The key to protecting yourself from disasters like this is specificity in the final language.

If Marcel had specifically limited the provision to the community property interest he probably would have won.

If Linda had specifically expanded the provision to include the total value, then she would have also won without having to pay the extra court and law firm fees.

You Can Prevent This Divorce Retirement Mistake

What happened here is a horrible outcome. It is horrible because they could have prevented it. Rather than directly addressing the misunderstanding and negotiating out in the open, this case illustrates the dangers of playing “winner take all” in divorce litigation. Sometimes you win, sometimes you lose. Do you feel good about risking it all to an outcome you don’t control?

You can make sure you don’t get a costly surprise like this by using very precise language in your uncontested divorce decree. If having that discussion reveals you don’t actually have an agreement on how to divide a piece of property, then you can explore Collaborative Divorce.