Author: JGL Law

[00:00:00] Lindsay Parvis: Welcome to JGL Law for You. JGL Law for You is a podcast by lawyers, but not for lawyers. Only on JGL Law for You do we discuss a wide array of topics to help you navigate the many legal processes, developments in the law, other current events, and how they may affect you, your family, or your business.

Lindsay Parvis: Hi there. I’m Lindsay Parvis, and I’m here today for JGL Law for You with Chris Castellano from our family department. He has over a decade of experience representing clients in Maryland family legal matters in cases like custody, divorce, and modifications. He encourages his clients to approach their cases with a focus on understanding foreseeable risks, determining how to mitigate those risks, and then performing a risk-reward analysis to find the most beneficial outcome for their case.

[00:01:00] I’m really interested to hear from Chris on today’s topic about navigating back to school for separated parents and families, both for those who have custody orders and those who don’t. So welcome, Chris.

Chris Castellano: Thank you, Lindsay. I’m happy to be here talking today. It’s a very important issue, and one that certainly comes up every single year, like clockwork, back to school.

Lindsay Parvis: Sure, it is. So, what is important about back to school for separated families?

Chris Castellano: Well, yeah, I mean, back to school as a time period for non-separated families is difficult, right? You’ve got children who are back-to-school age who are going back and dealing with a new routine. They’re dealing with new classes, new friends, and new stressors, right?

When you add into the equation a separation or even a new custody order, you ramp it up to 11. You’re not only dealing with, alright, who’s making lunches, [00:02:00] who’s getting school supplies. We’re now talking about different approaches to both of these items because we’re in two different households.

And so, it’s really about this time of year, for those individuals dealing with separation or a custody order, how to start establishing new routines for the child or the children in question. How do I do that in conjunction with following a court order? And with all of that, how can I do that in a way that reduces stress on the child? Because that is what should be the ultimate focus for parents.

Lindsay Parvis: So, when navigating these changes back to school, what parts of a custody order come into play?

Chris Castellano: Generally speaking, you’re going to be talking about the full gamut of your custody order. You’ve got physical custody, we’ve got legal custody, right? And just for our [00:03:00] listeners, here is the very, very basic primer on those two concepts. Physical custody is your actual time-sharing.

Here in Maryland, we focus on where the child is sleeping at night, right? The overnight concept, that’s your physical custody. Where is the child at a given location physically?

Legal custody is how decisions are made for the child, and those decisions have significant consequences. It’s not decisions like, should the kid have turkey or ham for lunch at school? We’re talking about, should the kid be on an IEP? What school are they signing up for? And depending, quite frankly, on the situation, it may even include extracurricular activities.

What you’re balancing is the physical and legal custody aspects of your custody order at all times when thinking about this back-to-school period.

Lindsay Parvis: And what parts of [00:04:00] the custody order or parenting plan may not so obviously tie into legal or physical custody, but do come into play with back to school?

Chris Castellano: Well, I find one of the primary aspects of a custody order that people may not automatically think of, relative to back to school, but that ends up being one of the most consequential, is transition periods.

And I don’t mean that in the sense of our introductory paragraph, where we’re talking about transitioning from summertime back to school. I mean the actual physical transition of a child from one parent to another. So many of these cases, and Lindsay, you know, you and I have done them together, you’ve done them separately, involve transitions that are usually negotiated or ordered to occur at the school itself.

We do this for a lot of different reasons that we don’t really need to necessarily get into, but ultimately, what it’s there for is to [00:05:00] hopefully, and I say that with emphasis, reduce the stress on the child by having only one parent at pickup or drop-off at a time in a separation circumstance.

Unfortunately, if there is a misunderstanding, whether intentional or not, about how the transitions are to work, whether it is in a custody order or custody agreement, or for these newly separated parents that don’t have that custody order or an agreement in place, then the location, time, and logistics of that transition can be a very sticky issue.

Lindsay Parvis: So, let’s first focus on parents who have a custody order or a parenting plan. What is your top tip or recommendation for those parents for back to school? And then we’ll separately focus on practical suggestions for parents who [00:06:00] don’t have those types of documents.

Chris Castellano: Well, you know, it’s funny. We tell our students when they’re going back to school, pay attention, read your assignments thoroughly, understand what you’re looking at, right? That’s what I tell my clients. It’s no different. We always need to be studying, and if you have a custody order or you have a custody agreement, the biggest, most important tip to provide these individuals is, read what you have in front of you.

A custody order is not terribly long, usually, but it is your veritable script for how you’re supposed to act on a lot of different items under the circumstances, right? And you can apply that pretty efficiently, as long as you know what it says. Study that piece of paper. That’s my biggest tip for parents.

Lindsay Parvis: What are some of the practical challenges that come up for parents who may not have a court order or parenting plan, [00:07:00] or whose court order or parenting plan doesn’t go into a lot of detail?

Chris Castellano: Absolutely. And this happens. If your custody order or your agreement, let’s just say your custody order doesn’t go into great detail, don’t feel abandoned or out of the loop. That’s not uncommon. And similarly with agreements, you know, we can’t put in every single level of detail necessary.

And so, you need to understand some of these things that are going to pop up, right? So, what I like to think about when I’m analyzing or talking to clients about what challenges they will face at this new transition period of the year, the school year, is this: how is communication occurring? And that’s not just communication between you and the other parent, but it’s communication between you, the other parent, [00:08:00] the school, the teacher, the administrators, the school counselors, etc.

If the kid has a cough on the first day of school, a nosebleed, or gets hurt on the playground and is sent to the nurse, who’s the nurse calling? Right? And so that brings in one of the next practical challenges: did you go through all of the paperwork relative to the school sign-up process?

At least in Montgomery County, and depending on the school, certainly some schools and administrators require you to fill out the emergency contact information every single year, as if it were never filed before. And so, a practical challenge is making sure you know what paperwork needs to be submitted to the school administrator to understand these particulars, right? Emergency contacts, that’s a challenge.

On the same line, the school portal. We’re all well aware of these wonderful school portals and communication avenues that are being utilized right [00:09:00] now. Some are too good, some not so great, but we’re all stuck with them. Understanding how to access that information is important. If you are a parent without a separation agreement or a custody order, you’re still expected by administrators, and quite frankly, your co-parent, to understand how to access this information from your child’s school.

That doesn’t change just because you’re in a separation environment. So, accessing the portal, accessing information, you’re seeing a theme here. It’s all about being in the know. Accessing that information, and then from there you look at some additional challenges, just what we touched on earlier, logistics of child drop-off, exchanges, extracurriculars, and, to the extent that there’s aftercare. There’s the devil in the details with a lot of those different items.

Lindsay Parvis: Do you think that comes up because parenting roles change [00:10:00] when there’s a separation? Parents who may have been the main communicator or point of contact, they aren’t communicating the way they were when they were together.

Chris Castellano: Oh, absolutely. I mean, the different dynamics that arise in a separation, and let’s just even separate, no pun intended, the separation from the actual custody order. As you and I both know, once an order is in place or an agreement is in place, the dust settles for a bit, and communication can, most of the time, be a lot smoother.

So, in that new separation period, there’s a lot of dynamics at play. Personality dynamics, right? So, you have competition between the parents that always arises. You have minimization of the other parent sometimes, and that can go hand in hand with that competition. But you have the tendency [00:11:00] to say, well, I’m focused on the child, but you’re not actually thinking about the child and how your decisions are impacting that child.

So, there’s a lot of dynamics at play, and they can add another layer of challenge to these practical issues that we just discussed.

Lindsay Parvis: Maybe even more challenging for a parent who hasn’t been used to communicating with the school or figuring out school portals and accessing those. They may have relied on the other parent when they were together.

Chris Castellano: Not only would they have relied perhaps, on, hey, when is the parent-teacher conference? Maybe they will come to every single parent-teacher conference, and that’s great. Maybe they went to the back-to-school nights, but they weren’t the ones putting it on the family calendar, right? And now they’re expected, rightfully so, to put that on the calendar.

They’re expected to understand what they are, and if they miss it, then you have the emotions of [00:12:00] how could you let me miss this, or why didn’t you let me know? To a certain extent, you can understand that, especially with people who are just now entering this phase of their family life. But there’s an adjustment necessary for these newly separated parents, because it’s now time to do the work.

It’s now time to understand what’s going to be expected of you as a parent, because you used to be able to rely on your spouse or co-parent to carry the load. Now, both of these separated parents are 100% parents.

Lindsay Parvis: And when you say 100% parent, what do you mean?

Chris Castellano: Well, what I mean by that is, you can’t rely on your co-parent to get the job done relative to information, really, when it comes to your child’s schooling. Now I say that not out of a, you should do everything. I say that out of what I would like to see [00:13:00] from more people, which is that their mental approach, their paradigm looking at schooling, should be focused on, how can I be there 100% of the time for my child?

Now you’re always going to have, especially with shared legal custody, a co-parent that’s equally involved. You can’t excise that person out, nor should you. But it’s a paradigm shift that people need to undergo, one where they need to understand that there are expectations placed on you and that you should have for yourself.

Lindsay Parvis: Ah, so back to school for separated parents really calls for a change in perspective.

Chris Castellano: I think so. Yeah.

Lindsay Parvis: So why don’t we touch on consistency and why that’s important, and some resources for helping parents establish consistency?

Chris Castellano: So, consistency. Let’s talk about it first, relative to the child, right? And that is [00:14:00] going back to that theme of stability for the child, and de-stressing the circumstances around the child. The child is already in a newly separated situation, already shouldering quite a bit of stress, whether they say it to you or not, whether it’s obvious to you or not, it’s there. And recognizing that is a significant part of a parent’s job.

So, you need to make sure that there are the low-hanging fruit routine necessities, and that you can ensure consistency. And a lot of times that happens with simply writing an email to your co-parent to say, listen, my suggestion is that when the child comes home from school at four o’clock, they start homework right away.

Now, if there’s a disagreement between the two parents, maybe, well, no, they need a snack first, and then they can play for 25, 30 minutes, and then they do homework. And if you can come to an agreement, great, but that’s the level of consistency that we’re talking about relative to the child, [00:15:00] understanding what routines need to be in place, understanding how you can adapt your new situation to those routines, and then staying consistent between the two households and, frankly, for yourself within your own household from day to day.

Now, relative to yourself as a parent, and maybe with your co-parent and the school, when we talk about consistency, a lot of the time, this comes down to how you communicate. You’re going to communicate through email to your school administrator so that the co-parent is also in the know. You’re CCing that individual. You’re not just making phone calls, so then the other parent feels left out. Those are the types of consistency issues that arise.

Lindsay Parvis: Besides lawyers, who are some of the helping professionals who can guide parents who want to try to develop consistency between their homes?

Chris Castellano: Yeah. One of the people that I recommend the most, that class of people would be a parent [00:16:00] coordinator. These individuals are trained to help parents navigate these challenging times, and most family law lawyers that you interact with, and that these individuals interact with, have a number of different people that they can recommend to parents who will be effective for their specific situation.

Lindsay Parvis: So, what are some of the common points of disagreement that parents have over back to school, and what are your suggestions for avoiding them?

Chris Castellano: So, let’s assume that the child is there, there is some level of agreement about where the child’s going to school, because there certainly are disputes that arise for the actual school itself and where the child should be enrolled. But let’s assume that we’re at back-to-school day number one and we’re on the same page about where the child’s going to school.

I would go back to, I think, one of the biggest challenges that is faced by parents in a newly separated situation, which is, where’s the [00:17:00] child going to go after the school day, right? Who’s going to pick up that child? The amount of times, and it’s disappointing to see, situations where two parents are there and they’re essentially goading the child toward one car or the other, just to be the one that picks up the child and brings them home. Or maybe they go into the administration building 15 minutes before the end-of-day bell just to be able to pick up the child and bring them home.

Those are the biggest flashpoints. It is that transition of where the child’s going to go after the school day that presents the biggest challenge.

Lindsay Parvis: And what happens when parents can’t agree? What’s the path to figuring that out?

Chris Castellano: First and foremost, you should let the school know what’s going on. These school administrators are well aware of, and often trained in, how to deal with parents [00:18:00] that are undergoing a separation or have a custody order in place.

So, to break this down a little bit, if you have a custody order, it’s very important to provide that to the school administrator. Those individuals understand, okay, this is what the custody order says. The child’s going to go with dad on Monday and Tuesday, with mom on Wednesday and Thursday, and then with dad on Friday, and we alternate that, right?

So, giving the school itself the custody order is a very important step. But if disagreements continue and they’re not getting any better through proper communication, and you’re doing the proper protocols that are established in your, let’s say, your custody order, maybe your custody order calls for that parent coordinator. And so that would be the next level of assistance that you can ask for.

If you’re still not getting a solution to the dispute, then it’s time to call an experienced family law [00:19:00] attorney. You explain that situation, and maybe that attorney can guide you, navigate you through this scenario, because it’s stressful. And a lot of the time, when you have stressors, you build up mental boundaries or obstacles that make it harder to get you to where you need to go. And talking through them oftentimes can help you break through those boundaries.

And so that’s the step I would take: school administrator, parent coordinator, then talking with an attorney.

Lindsay Parvis: What advice or suggestions do you have for parents newly separated?

Chris Castellano: Newly separated, I would recommend speaking with an experienced family law attorney right off the bat. I say that because, as I mentioned, there’s a lot of opportunity for flashpoints, what I call flashpoints, that are disagreements between parties that could escalate, and escalate in a really bad way.

You don’t want your child exposed to these levels of [00:20:00] escalation, right? And so talking with that attorney can help put you in touch with professionals, whether it is in a therapeutic setting or in that parent-coordination setting, and hopefully provide those tools that could either ratchet things down or help the one parent and the co-parent navigate these difficulties, particularly in this transition time of back to school, and prevent those flashpoints from ever occurring.

It can also set up those basic premises for how these people are supposed to approach things such as the transition period.

Lindsay Parvis: And so, for parents who are looking for legal help, you’ve already mentioned talking with a lawyer for advice. What are the other legal paths for parents when it comes to back-to-school disagreements?

Chris Castellano: Yeah. Once the issue is known between the parents and you’ve sought out that legal advice, that [00:21:00] attorney will usually talk through, for newly separated parents, how can we establish an agreement that will outline how to approach a lot of these different items, right? The transitions, extracurriculars, and the communication with the schools.

If you have an agreement in place already, or even a custody order, your path is a bit more apparent, right? It is, if the issue has risen to the point where I need to make a change, then you’re filing in court for what’s called a custody modification. You’d have to talk to an experienced family law attorney about your particular case and understand if, A, you’re even eligible, if you will, for a custody modification and what your chances of success are, and if it’s in the best interest of the child.

But generally speaking, that’s what you’re looking at. What happens if you have something that, like we talked about, these flashpoints, right? If that flashpoint does escalate, then what are the options? Well, [00:22:00] you need to make a quick fix real fast if it’s something that’s impacting the child in a bad way, and that’s when we have the option to file emergency motions with the court.

That’s certainly a situation where you involve an experienced family law attorney that understands the court system, that can get you in front of a judge in short order, and that can explain your situation to hopefully get some judicial intervention on something that is really going to have a lasting negative impact on the child.

Lindsay Parvis: So, Chris, as we wind down, what are the top takeaways that you want listeners to have about back to school for separated families?

Chris Castellano: Yeah, absolutely. This is a challenging time and remembering that it is a challenging time for several reasons, not just because of the separation, which is the obvious one, but it’s challenging for a child because they’re starting a new year.

[00:23:00] January 1st is not a new year for a child, right? It is day one of the new school year, that’s their new year. That’s when they start mentally a new year for themselves. And so, understanding that is critically important. And you can help yourself, help your child, and help your co-parent by doing things such as, if you have that custody order, understand the custody order. Read it. Read it and study it.

If you have an agreement, do the same thing. And if you don’t have an agreement or a custody order, take inventory of what your communication style is and what the other parent’s communication style is and try to reach out, reach across, for the best interest of the child, and establish some of these basic communication protocols, if you will, at the very least to avoid flashpoints.

And so that brings you right into the next key theme, key reminder for newly separated parents [00:24:00] or people with a custody order. It’s to communicate clearly with your co-parent, right? Communicate clearly with your school administrator and all professionals involved, whether it’s a parent coordinator or even your lawyer.

Communication is key. The next would be, and arguably the most important, prioritizing your child’s needs, their best interests. The concept of best interest has come up multiple times during this conversation, and for good reason. It’s that the child is the most important factor in this entire conversation. If you start to set the child’s needs or best interests aside, you’re losing this battle.

Lindsay Parvis: So, Chris, for our listeners who encounter back-to-school challenges or have questions about how best to approach back to school, how can they contact you?

Chris Castellano: Yeah, absolutely. I’m in Rockville at the Joseph [00:25:00] Greenwald & Laake office. You can contact me directly at 240-399-7881. My profile is on our website, and I would be happy to have a conversation about how to help you best navigate this time of the year.

Lindsay Parvis: Thanks so much, Chris.

Chris Castellano: Thank you.

[00:00:00] David Bulitt: Welcome to JGL Law for You. JGL Law for You is a podcast by lawyers, but not for lawyers. Only on JGL Law for You do we discuss a wide array of topics to help you navigate the many legal processes, developments in the law, other current events, and how they may affect you, your family, or your business.

[00:00:20] Today, I have my partner and colleague at Joseph Greenwald and Laake, a specialist in the area of family law. Chris has been working with clients for over 10 years, on all areas of family law cases, and today we’re talking about a particular niche: retirement accounts. Now, most of us, when we think of retirement accounts, we think of, you know, my IRA, what’s in my IRA, what’s in my 401(k) at work. But in fact, there are a lot of different types of accounts, and there are different ways that they’re handled in family law cases, and that’s what we’re here to talk about. Right, Chris?

[00:00:51] Christopher Castellano: That’s right, David. Thank you for having me on again today. It’s an exciting but important topic.

[00:00:56] David Bulitt: Yeah, it’s interesting in the scope of family law. I think when we [00:01:00] talked about this earlier, the place to start, like with most things, is at the beginning. So, tell us a little bit about what different types of retirement assets there are generally, and then we’re going to move to how they can get divided, if at all, in a divorce case.

[00:01:15] Christopher Castellano: Yeah, sure. I mean, there are so many different flavors of retirement benefits. You know, there’s the more common and then the less common, right? And that has changed over time. We’re all familiar with the 401(k) concept, but then there are also other benefit programs, such as a 403(b). You mentioned an IRA. There’s an RIRA, right?

[00:01:38] David Bulitt: A lot of letters, Chris.

[00:01:38] Christopher Castellano: A lot of letters, a lot of acronyms, and it’s all done that way because it’s all part and parcel of the federal tax code and state tax codes because there are tax benefits to each one of these types of retirement accounts. The more traditional account that I think is important to talk about, and there are a few different flavors, is the pension [00:02:00] account.

At least in America, the pension account has waned over time. There are a lot fewer organizations that offer pensions, but they’re certainly still available in government agencies, whether federal, state, or local. And it is certainly a benefit and a retirement asset that comes up quite often in divorce cases.

[00:02:23] David Bulitt: Let me ask you a question, because again, let’s assume that folks are learning this stuff from the very beginning here. Well, isn’t everything kind of a pension? I mean, what’s the difference between a pension, like you call it, and a regular retirement account, a 401(k) or an IRA? What’s the difference?

[00:02:38] Christopher Castellano: So, a lot of people know, or perhaps a lot of people know, what an annuity is, right? A pension is essentially just an annuity. It’s a payment that you receive from your organization after you retire. That is a set amount per month, right? That’s the easiest way to understand it.

So, you know, [00:03:00] you’ve worked at a company for 20 years. After you retire, you’re going to receive a set amount of money per month. Now, there are different options that you can take. For instance, you could cash it out and roll it into a different annuity. You could take a lump sum for it. But what we’re talking about in general terms is your pension is a benefit that you get as a per-month payment.

I like to think of it as similar to the lottery, right? You can either get that lump-sum version, or you can get the annuitized payment.

[00:03:34] David Bulitt: It’s something that you earn. So, it’s something that someone earns during the course of their employment, whether, as you mentioned, with a government entity or military, maybe, or something else. It’s something that’s earned while they’re working there.

[00:03:46] Christopher Castellano: Right, yeah, absolutely. It’s one of the employment benefits that accrues during the process of employment.

[00:03:52] David Bulitt: That’s right. Okay. And just to put a fine point on this sort of comparison to an annuity, [00:04:00] an annuity might be something that you or I just go out and buy as an investment vehicle, right?

[00:04:04] Christopher Castellano: That’s right.

[00:04:04] David Bulitt: The pension is something that your employer is providing to you that has a lot of similarities to the annuity, and it provides the same sort of payout benefits and alternatives that you talked about.

[00:04:16] Christopher Castellano: That’s right. It depends on the various different plans that you’re a part of or the organization. Some people may have to pay into their pension. Some people get it as part of their compensation package, and they don’t have to actually pay into it per month. And it depends on if you can take a lump sum or not. But at its core, yes, it’s an annuitized payment that is based on essentially an actuarial prediction of one’s lifespan.

[00:04:46] David Bulitt: Again, I’m trying to think about if I didn’t know what I know, right, going into a divorce and, you know, we’ve got houses, we’ve got some bank accounts, maybe some stocks or cars or whatever it is. These are things that I have today, right, versus [00:05:00] this pension that you’re talking about, or another type of retirement vehicle, the 401(k), 403(b), IRAs, whatever they may be. But I don’t have them today. So how are they divided? A two-part question is, does it matter when you earn these assets, when you start to acquire or accumulate these assets, and how do you even divide them?

[00:05:20] Christopher Castellano: Yeah, sure. So, the first question I always ask when I talk to a brand-new person, before I’m just trying to understand the lay of the land, right, that question is, what type of retirement are we looking at, right? Okay, let’s just, for argument’s sake, say it’s a 401(k). The next natural question is, when did you acquire that? As you say, like the acquisition.

If it was acquired because I worked at Company A, and that was five years before the marriage, and that 401(k) is just still sitting there, well, that’s going to be a non-marital asset, right? That was acquired prior to the marriage.

So, then the next scenario is, while I was working at [00:06:00] Company A, I’m still there, and I got married, and I started acquiring or getting the benefit of that 401(k) both when I was single, not married, and since I’ve been married, right? So now we’ve got the little bit more complicated scenario where a portion of the 401(k) is non-marital, and a portion of the 401(k) is marital.

Then there’s, let’s be real, the easier scenario, right, which is, I started working at Company A after I got married, and that’s when I started getting the 401(k). The entire 401(k) is marital.

As far as the division of these different accounts goes, with that question in mind of what’s marital and what’s non-marital, you present that to the court to say, alright, this percentage, this quotient of the retirement benefit that we’re talking about, whether it’s a 401(k), 403(b), or IRA, this is marital. So, court, we’re asking you to make a division of this account [00:07:00] on, let’s just assume, a 50-50 basis.

[00:07:04] David Bulitt: So, when you say marital versus non-marital, you mean if I’m your client, and I say to you, “Alright, well, we were married in 1990. I started working at this job in 1985.” I’m dating myself, as you can tell. “So now we’re in 2025. It’s 40 years later. I’ve been working for the same company for 40 years, and I’ve acquired this retirement asset over the 40 years. But some of those years were before my spouse and I were married. So how do you figure out what my spouse’s share might be? Does she get an interest in what I earned before I was married?” That doesn’t seem fair.

[00:07:40] Christopher Castellano: It’s a slightly complicated question, but in general terms, right, if we’re just going to look at the years that are marital and the years that aren’t marital, I think you said five years were not marital. In [00:08:00] this scenario, that would be about 88% of the 401(k), or the benefit, that is marital, acquired entirely during the marriage.

Now, let’s set aside the more complicated questions of, you know, dividend reinvestments, or this, that, and the other, or rollovers. So, pure analysis of how much is marital and how much is not marital, it’s fair to say about 88% would be marital in this scenario.

[00:08:24] David Bulitt: So, my risk in that scenario is that my soon-to-be former spouse has a claim to half of that 88%. Again, excluding these other potential factors that may impact that.

[00:08:32] Christopher Castellano: That’s correct.

[00:08:32] David Bulitt: Okay. Okay. Now, what if we had a prenuptial agreement that said, you know, I keep my retirement, doesn’t matter why? And this now again, you know, let’s keep in mind we were married back in 1985, so it’s 40 years ago, but we had a prenup. And in that prenuptial agreement that we both signed, and we both had lawyers who explained it to us, it said that whatever retirement that I accumulate during our marriage is [00:09:00] mine, regardless of what the law is. Is that something that’s enforceable? I don’t want to get too far into prenups, but I do want to, because that seems important, right?

[00:09:07] Christopher Castellano: Yeah, it’s absolutely important. If you have a solid prenup, as you say, that was properly negotiated, then that prenup is more likely than not going to successfully exclude that retirement account.

[00:09:18] David Bulitt: I don’t want to get too far into the prenuptial agreement discussion. We talked about that before, and I want to have you back to talk about that again. Might my spouse in that circumstance say, well, hold on a second. We got married 40 years ago, and now he’s got $2 million in his retirement account. You telling me I get nothing out of that? I mean, is there some sort of an equitable argument even though there’s a prenup? And again, I’m trying not to go too far down this road, but while we’re talking about it, is that some risk that I have?

[00:09:45] Christopher Castellano: Not to give the lawyer answer, there’s always going to be a risk. That caveat, you know, there’s always a creative argument floating out in the ether somewhere. But generally speaking, I would feel, I like to go based on a [00:10:00] scale of confidence, I would feel pretty darn confident in that scenario that that’s going to be excluded.

[00:10:05] David Bulitt: Alright, so let’s go back to the topic at hand here. We’ve talked about the relative ease in figuring out what’s the marital portion of what we call a defined contribution plan, which is this 401(k), the 403(b), IRAs, and so forth. But tell us a little bit about this defined benefit plan, this pension arena. How do they get divided since there’s not really an amount of money sitting in a bank account today?

[00:10:26] Christopher Castellano: Well, that’s right. So, how they figure out the actual payment to you — there’s a portion of the larger plan, without getting too much into it. There’s a portion of the larger plan that all the employees or the plan participants are entitled to. There are reinvestments of this plan at hedge funds. We don’t have to get into all that, but essentially, they’re going to look at various different factors to determine what your annuity payment’s going to be, right?

They’re looking at your salary, [00:11:00] average salary, and various different plans look at it differently. But commonly, people know about, at least in the federal government, the high three, which is the average of your highest three years of salary. They’ll look at your age, how long you’ve been employed, and then the actuaries, the people behind the scenes, behind the curtains, are going to predict how long is this person going to live, because that’s how much the payment is going to be. That’s when we get into the actuarial aspects of the pensions.

[00:11:32] David Bulitt: Okay, so what you’re talking about is trying to figure out what today’s value of that pension might be, even though it’s going to be paid over a period of years down the road, right?

[00:11:41] Christopher Castellano: Yeah. There are two different options when you’re evaluating a pension plan in the context of a divorce. One is a present value, and then the other is the “if, as, and when” predicted value, right?

The present value — I am sure, David, you do this just as well as [00:12:00] all of us — is that you hire that expert to get into it and figure out what that present value of that pension plan is today and present that to the court.

[00:12:11] David Bulitt: Okay, but wait. So why would a client care about the present value if the client’s spouse isn’t going to be getting that benefit for years down the road? Why does it make any difference? So, if I get my share, don’t I have to wait? Or is there some other way to get relief based on this present value of this pension?

[00:12:30] Christopher Castellano: Well, yeah, there are certainly ways that if you present, if you’ve opted to present a present value determination of the pension, then you can certainly present that to the court. And as long as the assets necessary to what we call horse-trade or set off the values are available, then you can present a creative solution to the court to say, listen, I understand that the pension is worth a total of $300,000. [00:13:00] I’m due $150,000 from that, and you can get it from the cryptocurrency account.

[00:13:04] David Bulitt: So, you might have a client who says, look, I don’t want to wait 10 years, 20 years, whatever it is, to get my money. And so, here’s a pool of assets. I’d rather get my share of what the value is today, today, rather than waiting, right?

[00:13:18] Christopher Castellano: Yeah.

[00:13:20] David Bulitt: Okay. And let’s shift for a second. Now your client says, you know, this is my only retirement, whatever I get from this pension, so I want to keep it as my retirement. Then let’s go back to the same circumstance where a portion of the years that my spouse worked and earned this pension was earned during the [00:14:00] marriage, and a portion was earned before the marriage. How am I getting my money, and how is it determined how I’m going to get my money? So, you’re referring to the plan participant, the employee, who earned it.

[00:14:24] Christopher Castellano: Yeah.

[00:14:24] David Bulitt: I wasn’t clear. Your client is the employee who says to you, you know what, I’m comfortable with what I’m going to get in terms of an asset division, but I don’t have any retirement. What my spouse earned is going to be, whatever I can get from that is going to be my retirement. So, I just want my share as if it were a retirement asset. I don’t want it in cash today. I don’t want a horse trade. So how is it determined what I’m entitled to, and how is it paid to me?

[00:14:39] Christopher Castellano: The benefit plan would be paid once — and let’s set aside yet another caveat of separate interest versus shared interest for pensions. So, let’s assume that we’re talking about a shared interest, right? Shared interest means that once the plan participant receives, once they receive their benefit payment on that [00:15:00] per-month basis from the plan administrator, then a portion of that is also going to go to the alternate payee, the spouse, right, the former spouse.

So yes, you’ve got to wait. It could be five years; it could be 10 years. But once that pension goes into pay status, you’re going to receive your portion of that pension payment.

Now, how the amount is determined is going to be based on — if it’s a shared interest — the plan participant’s life and factors. We talked about those: salary, age, years of service, actuarial factors. It’s going to be based on how much of the pension was acquired during the marriage, right? So, if all of it was acquired during the marriage, and there’s no equitable division that varies from the 50-50, then half of that pension payment, less any necessary fees, would go to the alternate payee or the former spouse.

I don’t know if you want to [00:16:00] get into separate interest, but just very briefly, if that’s an availability for the plan in question, and that’s a big if, but some of the larger Fortune 50 companies certainly offer separate interests in the pension.

[00:16:27] David Bulitt: David, when it comes to a separate interest, and that’s assuming that the plan allows for a separate interest, but certainly a lot of Fortune 50 and the larger companies, if they offer a pension plan, they offer what’s called a separate interest. And what that means is you segregate out the portion of the pension benefit plan that would go to the plan participant for the benefit of the alternate payee, the former spouse. The former spouse then becomes their own actuarial factor, right?

So, you’re going to look at that individual’s age, and depending on the plan, there are certainly some — I don’t want to say strategy, that may oversell it — but strategies that you can employ from a financial perspective. You know, should we take a separate interest or should we take a shared interest in this plan? But that’s a [00:17:00] bit more of a specific discussion.

[00:17:21] David Bulitt: I don’t want to drill too far down, but when you say a separate interest, does that mean that my spouse would then have their own separate pension apart from mine?

[00:17:31] Christopher Castellano: Essentially, right. So, the employee’s pension that was acquired during the marriage is now divided in whatever that percentage of division was, right? Let’s just make it easy. It’s divided in half. And so now the pension plan sees the alternate payee spouse as a distinct recipient of that pension. So essentially what happens is that the pension plan divides the pension into [00:18:00] two parts: the actual plan participant’s pension, and then the alternate payee or former spouse’s portion, which becomes its own distinct pension within that umbrella.

[00:18:10] David Bulitt: Alright, so let’s get off the separate plans for a moment and go back to the shared interest, right? So here I am, your client again. I want to wait to get my benefit when my spouse retires. But what happens if my spouse dies, either before I start to acquire my share of the pension, or during the course of the time that I’m acquiring my pension? You know, I don’t like him very much, but I still don’t want him to get hit by a bus. But you know, that happens. He’s gone. Do I lose my benefit in the shared interest world?

[00:18:41] Christopher Castellano: The answer is, anticlimactically, yes, you would. You would lose that benefit. Now, there’s another subset within the pension plan, right, and that’s called a survivor benefit annuity. The survivor benefit annuity, the best way to think of it is [00:19:00] essentially an insurance policy on the plan participant, the person receiving the pension benefit.

That person would pay a certain amount of their monthly benefit towards this quote-unquote insurance policy so that if the plan participant in a shared interest world predeceases the alternate payee, then a portion of the pension benefit will still go to the alternate payee.

[00:19:26] David Bulitt: So, if I pay for this survivor benefit annuity out of my share of the benefit that I’m entitled to, then if my spouse predeceases me, it’s almost like, as you said, an insurance policy. So, I would still get my benefit, even though I might live an extra 10 or 15 years, whatever it might be, after the death of my former spouse.

[00:19:44] Christopher Castellano: That’s right. So, it comes at a cost, but that’s with anything, right? There is a reward to the risk that’s employed. Now, I should say this much, to go back to the separate interest, it’s a wholly less relevant conversation [00:20:00] to have relative to the survivor benefit if it’s a separate interest, right? Because the benefit of separate interest is essentially building in that concept that even if the plan participant predeceases you, you’re still getting your distinct payment.

[00:20:13] David Bulitt: So, Chris, now let me ask you another question entirely. We’ve been talking about the former spouse getting essentially 50% of their share of the marital portion of this retirement asset, whatever type of retirement vehicle it is. Are there any factors that might affect whether or not the former spouse gets more or less than that 50% share?

[00:20:35] Christopher Castellano: Well, certainly. In Maryland, we’re an equitable division state, which means that when you get to court, the court’s going to weigh the equities between the parties, right? There are various different factors that could impact those equities and make the judge at the time say, you know what, I’m going to deviate from what would be the ordinary 50-50 division and say maybe it’s 55-45, maybe it’s something different from that.

And those factors could include the length of the marriage, the health or age of the parties involved, [00:21:00] certainly the contributions by either party to the marriage, and what led to the estrangement of the marriage, what led to the breakdown of the marriage. And oftentimes that could lead to an alteration or deviation from that normal 50-50.

[00:21:28] David Bulitt: Okay. So there might be other factors in Maryland, as you mentioned, a few of them, that might affect the general, just drawing a line down the middle of the page, and everybody gets half.

Okay. So now we’ve gotten past the point that I’m going to get my share of this retirement asset, whatever it is. What happens? Does there have to be anything in writing, or is it part of the divorce decree, or is there something else that needs to be done in order for me to make sure that I get my money that I’m entitled to?

[00:21:55] Christopher Castellano: For the purposes of this conversation, let’s set aside an IRA. And I’ll just say [00:22:00] briefly, for an IRA, all you need is a form that’s usually found within the plan documents or on the website for your IRA, and you can do a transfer of assets.

Okay, so let’s set that aside for a moment. For your 401(k)s, your 403(b)s, your pension plans, all the quote-unquote traditional retirement vehicles, you would need what’s called an eligible domestic relations order, right? Oftentimes, these are referred to as qualified domestic relations orders. The federal government has their own spin on what they call them, but generally speaking, it’s a court order that mandates the plan administrator to divide the pension or the 401(k), or whatever the retirement benefit is, according to the court’s order, right?

[00:22:48] And that, whether it’s 50-50, 45-55, whatever it may be, as well as the survivor benefit to the extent that that was an option, right? So, it’s a court order that mandates how [00:23:00] the retirement is divided.

[00:23:01] David Bulitt: Okay. And just for a second, to go back to the traditional IRA, we fill out the forms. Do I pay taxes on that money when it goes from my spouse’s account into my account?

[00:23:12] Christopher Castellano: Yeah. So even with a QDRO or EDRO that transfers, let’s say, a 401(k), part of that could be a lump-sum transfer, whatever it may be. A transfer from one party to the other, whether it’s an IRA or 401(k) or what have you, is a tax-free transfer. It’s called a transfer of assets incident to divorce. It’s in the IRS regulations.

[00:23:38] David Bulitt: So, if we’re splitting an IRA and I’m getting, pick any number, $100,000 from my spouse’s IRA that’s being rolled into mine, I don’t have to pay taxes on that when the transfer happens?

[00:23:46] Christopher Castellano: That’s correct.

[00:23:46] David Bulitt: Okay. And what about when I start to get my benefit? Let’s shift back over to now, we’re in a pension arena, and now my spouse is retired and, I’m getting [00:24:00] my share of my portion of the benefit each month. When I get those checks, do I pay taxes on those checks?

[00:24:06] Christopher Castellano: Well, certainly it’s going to be treated as normal income. Depending on how it’s being paid, you’re going to get the normal deductions that you would for any other form of payment.

[00:24:18] David Bulitt: So, to sort of bring things to a head, wrap things up a little bit, what would you say to folks who are looking at divorce and where retirement assets might be at issue? What’s the best way to get there? What’s the best way to find out more information?

[00:24:33] Christopher Castellano: Yeah, I mean, as I think you and I have had quite a few conversations now, one of the recurring themes, and generally what I recommend to people, is do the homework. Do the homework proactively, right? Get your affairs in line. Understand your budget. Outline what your assets are when it comes to retirement benefits. Outline exactly what you have, what you believe to be non-marital, and for the sake of [00:25:00] everyone involved, track down the documentation of these accounts.

The older the claim for a non-marital portion of the asset, the harder it is to get those documents. So, the sooner you start trying, the better it is going to be for you, right? But it’s really to do that proactive homework.

The next step, in my humble opinion, is to talk to somebody, a professional, about how to deal with these retirement benefits. Oftentimes, the retirement benefits are the largest asset in a marriage. A lot of people think it could be the home, it could be the collector car, whatever it may be. But generally speaking, it’s going to be the retirement benefits. And so, this should be a significant focus of your case.

So, talking to somebody that has experience with various different pension plans, 401(k)s, federal retirement benefits, and particularly military benefits is important, and it’s certainly recommended.

[00:25:59] David Bulitt: Yeah, this is clearly a [00:26:00] little more complicated than how we’re splitting up the furniture and how we’re splitting up our cars. So, if folks out there, don’t do this on your own. Obviously, what you’re hearing from Chris, and that’s 100% correct, don’t try to figure this out on your own.

And Chris, if people are listening and want to get ahold of you, what’s the best way to do it?

[00:26:18] Christopher Castellano: Yeah, they can call me directly at 240-399-7881. Joseph Greenwald and Lake, based in Rockville, Maryland, and I’d be happy to talk about any and all retirement benefits issues that you have.

[00:26:34] David Bulitt: Thanks so much, Chris, for sharing a wealth of knowledge, at least a portion of your wealth of knowledge, today. Folks, I hope you enjoyed this and got some information. Please join us next time. This is JGL Law for You.